I went back and forth this week to find a teaching moment within the news then the inflation report came out Friday and the market rallied on it. I want to spend a little time walking through those numbers because the detail within the overall number is something not a lot of people take the time to look at.
CPI at 3.4 percent affects folks differently
Consumer prices rose 3.4 percent over the past 12 months. That is the headline and it is accurate.
That is the average though so you need to look closer.
Gasoline is up 27.4 percent from a year ago. Airline fares are up 23.4 percent. Energy as a whole is up 16.3 percent. Those impact me and I would say my personal CPI experienced like 10 percent, which is just a guess. I have kids in college so I fly them home and fly to visit. I work a long way from home. It has been hot so the air conditioner is running all the time and I have electric cars.
In the same report, motor vehicle insurance is down 5.1 percent. Medical care commodities are down 2.7 percent. Used cars and trucks are down 2.3 percent. Dairy is down 0.3 percent.
So, the CPI is one number that includes categories racing in opposite directions.
Which means nobody actually experiences 3.4 percent inflation. You experience whatever it is that you buy.
If you drive 50 miles to work every day, you are living in something close to 27 percent inflation. If you work from home, renewed your car insurance this year and bought a used car, your prices went down. Same country, same month, opposite experience.
This is why people argue about whether inflation is real or made up. Both sides are telling the truth about their own lives.
Core inflation
There is a second number in that report worth knowing about. Core inflation. This number leaves out food and energy because those two are a little volatile and it came in at 2.4 percent. That is down from 2.5 percent the month before, and it is not far from the two percent the Federal Reserve is aiming at.
So the same report says inflation is 3.4 percent and also says it is 2.4 percent. The difference between those two numbers is almost entirely oil.
Oil rose sharply this week. West Texas crude finished Friday just under $100 a barrel and Brent was above $104. And on Friday the national average price of diesel crossed $6 a gallon for the first time in history, at $6.05 according to AAA. Here in California the state average hit $8.09 on Saturday, roughly $3 a gallon higher than a year ago.
You may not think this impacts you but diesel matters to all consumers more than most people realize. My employer delivers new automobiles and trucks. Almost everything you buy spent part of its life on a truck. When diesel sets a record, that cost does not stay with the trucking company. It gets passed through to you.
And this inflation has a great impact on businesses as well. It certainly impacts my work life. I am the CFO at a large auto transporter and most of our miles are driven in California. A fully loaded truck can weigh 80,000 pounds and it gets 5 miles per gallon. Fuel is our largest expense……by a lot.
The rates we earn from our customers do not keep up with inflation. At the most we get 2 percent increases and that is not every year. Meanwhile diesel is where it is and our medical benefits are up nine percent. Our customers are aware of this but that does not change the math.
One quick line item about the diesel record since this post is about looking at the detail. The $6.05 mentioned above is truly a record but only as a dollar figure. If you factor inflation, diesel would actually be considered higher in the early 2000s. So this all time high is ignoring the same inflation the story is about.
The Federal Reserve meets Tuesday and Wednesday of this coming week. It will be interesting to see what they decide. As of late this week the market had priced in roughly a 70 percent chance that rates go up.
What I did about my own 27 percent
I own a Ford Bronco. I like it a lot but it is expensive to drive, especially here in California. It gets 18 miles per gallon.
My office is 45 miles from my house. Add lunch and errands and I put about 100 miles on a vehicle every working day.
With gas around $6 a gallon in Los Angeles and Orange counties, that is roughly $33 a day just to get to work and back home. Call it $700 a month.
So I leased an electric car. A Honda Prologue, $310 a month.
I want to be careful with the math here, because the easy version of this story is misleading. The lease does not replace $700 with $310. I still have to charge the car, and electricity in Southern California is not cheap. Between the payment and the power I am probably somewhere around $500 a month.
That is a real savings but it is not the reason I did it.
The reason is the 26,000 miles a year that are no longer going onto the Bronco.
Gasoline is the smallest part of what it costs to drive a truck that far. There is also maintenance, which at that mileage means tires every year and a half, brakes, and service on a schedule that never stops. And there is depreciation, which is the largest cost of all and the one nobody puts on a spreadsheet because you never write a check for it. You only find out what it cost when you go to sell.
Add all three together and that commute in the Bronco runs somewhere in the neighborhood of $15,000 a year. The gas is about half of it.
I did something similar to this a decade ago and it worked out nicely.
Years ago Fiat was offering lease payments on their electric car that were almost hard to believe, around $150 a month. I leased one. When that lease expired, I leased another. Six years of driving those cars instead of putting every mile on my Honda Element.
I kept well over 100,000 miles off my Element. When my son was old enough to need a car, the Element was still good enough to give him. Six years of my commute would have destroyed it. It would have been a trade in instead of a gift.
That is the whole argument. In addition to saving me gas money, it saved a car.
The numbers only work because of the distance. At 100 miles a day the second vehicle pays for itself. At 15 miles a day you would never recover the payment and you would just be adding a bill. And that $150 Fiat lease was a specific moment in the car market that no longer exists. The method still works. The price does not.
Now the part where I cannot do anything about it
So I found a route to help with the inflation at an individual level. As mentioned above, inflation is greatly impacting my job where fuel price surges have a great impact.
I cannot lease my way out of that. I can route better and buy fuel smarter, and ask for fuel surcharges, and we do. But the trucks run on diesel and diesel is what it is.
That is the difference between a household and a business, and it is worth understanding even if you never own a truck.
When gasoline went up 27 percent I had options. I sat down, figured out what the input actually cost me, and changed it. A fleet does not get that choice. Neither does the farm, or the grocery distributor, or the company that delivers the package to your door. They can absorb the cost or they can pass it along, and eventually most of it gets passed along. I mentioned above the surge in the cost of an airline ticket. Why did that happen……the cost of fuel.
So if you read that gasoline is up 27.4 percent and thought it did not apply to you because you work from home, it does. It just takes a longer route to reach you. It arrives as a fuel surcharge on a shipment, and then as a price on a shelf, and by the time you see it nobody calls it gasoline anymore.
That is the part of the inflation report that never shows up in your own category.
Blessings Come From the Worst of Times.
See you next Saturday.
Christopher
Weekly Notes — October 10, 2026