Cohousing-L Mailing List: Re: Reserves [was Rate of increase in HOA Dues?

[R Philip Dowds (rphilipdowds]

Brian —

I’ve never heard of the Chapwood Index, but I took a look at the referenced 
website.  While it asserts it’s based on what people *really* buy, there’s no 
findable-by-me explanation of the methodology used.

The CPI (Consumer Price Index) is calculated by BLS (Bureau of Labor 
Statistics) on a hypothetical basket of goods important to most consumers in a 
given base year; products in the basket are “weighted” to reflect how much of 
the product is actually purchased.  The cost of filling that basket with the 
same goods is then researched for subsequent years.  More arithmetic converts 
the CPIs to the inflation rate.  The contents of the basket may not change for 
years.
      The three big complaints about the CPI are (1) selection of products for 
the basket may be arbitrary; (2) identical products may not be available in 
subsequent years; and (3) marginal rates of substitution may push consumers to 
re-weight their purchases:  If the price of chicken goes up, people switch to 
fish.  Some experts think the CPI tends to run high side; other experts (more 
paranoid?) think the government jiggers the CPI to run low, to minimize burdens 
on inflation-indexed public programs like Social Security.

Meanwhile, the Federal Reserve relies on the PCE (Personal Consumption 
Expenditure) “deflator”.  This method relies on a basket filled with the actual 
products (in weighted proportion) that people are actually buying at the 
present time.  Then research retrieves what people were paying for the same 
basket in a prior year, and inflation is calculated from there.  This involves 
considerably more effort than the CPI, but many think it’s more accurate.

I’m just guessing now, but it sounds to me like the Chapwood Index is a variant 
on the Fed's PCE method.  What Mr Chapwood uses for product selection and 
weighting is of critical importance.

———————————
Thanks,
Philip Dowds
Cornerstone Cohousing
Cambridge, MA

> On Apr 8, 2025, at 4:54 PM, Brian Bartholomew <bartholomew.brian [at] 
> yahoo.com> wrote:
> 
> > inflation at 5% (too low?)
> 
> https://chapwoodindex.com <https://chapwoodindex.com/> still appears to be 
> around, and you can
> check your area for the cost of living increase. Boston is 13%.
> 
> Brian