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Rocky Road Ice Cream and Electricity

On April 10, the U.S. Labor Department — its Bureau of Labor Statistics — published the Consumer Price Index and Current/Real Earnings numbers for March. This is our latest read on electricity price trends.

Three numbers stand out:

First, average weekly earnings rose 3.2 percent in the year ending in March. That’s a bit over three percent.

Second, the CPI for all the consumer goods and services bought by consumers rose 1.9 percent during the same period. That’s nearly two percent.

And third, the CPI for electricity rose 0.3 percent. That’s about a third of a percent.

Let’s make these numbers more tangible.

Suppose a family had earnings of three thousand dollars per month as of March of a year ago. If its earnings rose 3.2 percent, it would rise by ninety-two dollars as of this March.

Suppose that family also spent three thousand dollars per month as of March of a year ago. It wasn’t able to put anything away for a rainy day. If it bought the same goods and services, and the prices it paid rose 1.9 percent, its expenditures would rise by fifty-seven dollars.

That’s pretty good. Why? Earnings went up by ninety-two dollars and expenditures went up by fifty-seven dollars. The difference – thirty-five dollars – can either be spent on other stuff or put away for that rainy day.

Now suppose that family’s electric bill was sixty dollars per month as of March of a year ago. If it used the same amount of electricity, and the electric rates it paid went up by 0.3 percent, its expenditures on electric service would rise by a buck and eighty cents.

That’s really good. Earnings went up by ninety-two dollars, expenditures on all goods and services went up by fifty-seven dollars and expenditures on electric service went up by a buck and eighty cents.

Of the difference between earnings and all expenditures — thirty-five dollars — just a buck and eighty cents goes to paying this March’s electric bill. This means the remaining thirty-three dollars and twenty cents is free to spend on goods and services aside from electric service and/or savings.

Like some Rocky Road ice cream?