Bacon Cheeseburger Index: The real inflation gauge

Most traditional indicators show inflation in the U.S. to be well under control, but bacon cheeseburger eaters know better.

In fact, compared with last year the cost of eating that most American of staples is up 5.8 percent, according to the Bacon Cheeseburger Index—an only partially tongue-in-cheek measure that brokerage firm ConvergEx uses to gauge consumer price pressures.

The surging index likely won't faze policy makers at the Federal Reserve who focus on indicators like the Personal Consumption Expenditures reading or the Consumer Price Index. Both show little inflation, with Monday's PCE reading a tame 1.5 percent on an annualized basis.

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Those types of readings, though, often fail to reflect conditions on the ground.

Bacon Cheeseburger
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"So much of measuring inflation has to do with expectations of future price increases rather than what is happening in the moment," Nick Colas, chief market strategist at ConvergEx, said in a report Tuesday. "As the U.S. central bank focuses on 2 percent inflation, everyone shopping for dinner sees far higher numbers. Does that matter to economists that only focus on 'core' inflation? No, but they should know that consumer expectations come from real world experiences. And what's more real than a bacon cheeseburger?"

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What's more, Colas' computation of a bacon cheeseburger cost actually might be lowballing things a bit.The latest Bureau of Labor Statistics data show drought conditions pushing some food prices to disturbingly lofty heights.

Ground beef, for instance, is up 16.2 percent from 2013 levels. Bacon prices have jumped 8 percent, and American cheese has surged 8.4 percent. Bread is the only thing that's fallen in our chosen delicacy, declining a modest 0.9 percent. (Oh, and if you'd like to go California-style with some lettuce and tomato, they are more expensive by 3.2 percent and 2.3 percent respectively.)

The Bacon Cheeseburger Index is just one of several "off the grid" indicators ConvergEx puts together periodically to go beyond standard economic barometers.

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Some others: Food stamp rolls (no wonder) are swelling at a 100,000-per-month pace, now totaling 47.8 million people or about 1 in every 7 Americans. Gun sales are stable at 21 million, and self-reported personal spending is at a post-financial crisis high of $94 per day.

Viewed together, Colas said the takeaway is a "a U.S. economy that is still only gradually on the mend."

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