Cost of Driving Drives Cost of Living Increases

Cost of Driving Drives Cost of Living Increases

January 14, 2022  | Jeff Davis

Earlier this week, the Bureau of Labor Statistics announced that inflation, as measured in their Consumer Price Index, was 7.0 percent from December 2020 to December 2021, the highest one-year jump in 39 years.

A closer look reveals that most of the increase revolves around costs related to the automobile.

CPI is the cost of a “basket of goods” purchased by the typical household, with each category of purchase weighted. 21.5 percent of the total index is taken up by food and energy, which are usually more volatile than the rest of the index. Spending on motor fuel is one-fifth of the entire food and energy category, and the cost of motor fuel was up by 49.5 percent in December 2021 over December 2020, which is a big part of the food and energy increase. (But the two-year average, December 2021 minus December 2019 divided by 2, is only a 13.3 percent increase.)

Because food and energy are so volatile, economists usually focus on “core” inflation, excluding those categories. But the automobile looms large over this category (the remaining 78.5 percent of all expenditures) as well. New cars and trucks are 3.9 percent of the entire index, used cars and trucks are 3.4 percent, motor vehicle maintenance and repair is 1.1 percent and motor vehicle insurance 1.6 percent of the entire index.

Added together, automobiles and their related expenses (excluding fuel) are 9.9 percent of the entire CPI index, or 12.7 percent of the entire “core” CPI, so the gigantic increase in used car prices and the more modest increase in new car prices loom large there as well.

When you combine motor fuel (on the non-core side) with all of the motor vehicle costs that are on the core side, the purchase, care and feeding of cars and trucks total 14.1 percent of all consumer expenditures. Multiplied by their weighting and added together, auto-related costs in December 2021 were 23.0 percent higher than in December 2021, and 9.2 percent above December 2019.

Weighted Unadjusted CPI-U Raw Indices
Pct. Of Dec. Dec. Dec. One-Year Two-Year Two-Year
Total CPI 2019 2020 2021 Increase Increase Ann. Avg.
All Items 100.00% 256.974 260.474 278.802 +7.0% +8.5% +4.2%
Meat/poultry/fish/eggs 1.84% 252.893 264.475 297.604 +12.5% +17.7% +8.8%
Dairy and related products 0.75% 221.924 231.740 235.442 +1.6% +6.1% +3.0%
Motor fuel 4.12% 230.189 194.996 291.510 +49.5% +26.6% +13.3%
All items, less food and energy 78.47% 264.935 269.226 283.908 +5.5% +7.2% +3.6%
New vehicles 3.88% 146.220 149.091 166.653 +11.8% +14.0% +7.0%
Used cars and trucks 3.42% 137.125 150.891 207.164 +37.3% +51.1% +25.5%
Motor vehicle maintenance/repair 1.08% 299.614 309.888 324.688 +4.8% +8.4% +4.2%
Motor vehicle insurance 1.56% 572.979 545.376 567.875 +4.1% -0.9% -0.4%
Airline fares 0.62% 252.411 205.983 208.954 +1.4% -17.2% -8.6%
All auto-related categories 14.06% 3201.407 3082.840 3791.686 +23.0% +18.4% +9.2%
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