Market Analysis

How Not to Measure Inflation: Turkey Edition

Wild turkeys frolic around Bryan Ranch in Alamo, CA, safe in the knowledge that they will not be your Thanksgiving dinner. Photo by Elisabeth Dellinger.

Every November, the American Farm Bureau Federation releases our favorite niche inflation indicator: the annual Thanksgiving Dinner Cost. It is our favorite not because it is the best. Rather, it is the most fun. We like Thanksgiving. We like turkey. We like pie. And we like some good-natured teasing of tongue-in-cheek fake indicators. And most importantly, we like reminding folks that very few inflation measures—silly or otherwise—bear any resemblance to one’s actual cost of living.

Trigger warning: I’m about to tear into the Farm Bureau’s indicator. Not because it’s dumb. Not because I’m an anti-farm-ite. Rather, because it’s illustrative.

With that out of the way, according to the Farm Bureau, a full Thanksgiving Day dinner for 10 will cost $49.12 on average. That’s 75 cents cheaper than last year for turkey, stuffing, veggies, rolls, sweet potatoes, two pies (with fresh whipped cream!) and your after-dinner coffee.

There is just one little problem. This is not actually the average cost for all of these items. Rather, it is the average of the lowest available cost. I’ll let the Farm Bureau explain:

“A total of 141 volunteer shoppers checked prices at grocery stores in 39 states for this year’s survey. Farm Bureau volunteer shoppers are asked to look for the best possible prices, without taking advantage of special promotional coupons or purchase deals, such as spending $50 and receiving a free turkey.”

In other words, your cost will probably match the Farm Bureau’s only if you’re buying a frozen house-brand turkey and the exact ingredients on their list:

  • One gallon of milk
  • Two nine-inch pie shells
  • 3 lb bag of sweet potatoes
  • 1 lb bag of green peas
  • One box of bread stuffing mix
  • 30-oz can of pumpkin pie mix
  • 12 oz of fresh cranberries
  • 1 lb of fresh veggies
  • ½ pint of whipping cream
  • One sack of flour
  • One sack of sugar
  • Evaporated milk
  • Unspecified amount of butter
  • Unspecified number of eggs

If that’s your list—and if you are the type to hit up three or four supermarkets to nab each ingredient for the best possible price—then huzzah, your Thanksgiving dinner might cost around $49. But for many households that’s probably a stretch. And not just because coastal Americans are increasingly fond of free-range heirloom turkeys with notarized family trees, birth certificates and travel documents. The Farm Bureau’s shopping list makes a number of assumptions about dessert, drink and side dishes too. Allow me to poke:

What if you (like I do) think pumpkin pie mix is the worst and instead do the whole shebang from scratch? Are sugar pie pumpkins, cinnamon, nutmeg, ginger, allspice, cloves, nutmeg, white cardamom pods and mace more or less expensive than they were last year?

What if you prefer using fresh cream in your pie filling instead of evaporated milk? Cream is pricier this year, according to the Farm Bureau, but evaporated milk is down.

What if you also make pie crust from scratch? That means more flour, more butter and more of that pricey cream.

Cranberries aren’t the only ingredient in cranberry sauce—what about the port, sugar, orange and corn starch?

What if you’re one of those people who put marshmallows in their sweet potatoes?

What if you make your stuffing from scratch or at least doctor your Stovetop with sautéed celery and onions and a nice herb blend?  

What if you brine your turkey? Where are the kosher salt, spices and (if you’re wacky like me) three types of apple cider? What if you end up brining your kitchen instead of your turkey and have to make two batches of brine and clean up the mother of all messes? (Add another $3 for Lysol spray?)

What if you prefer green beans to peas?

What if you actually like canned cranberry sauce and its frightening ability to assume the shape of its container?

What if your feast includes soup?

What if you’re vegan? Where’s the Tofurkey?

What if you prefer ham or turducken?

What if you have a brother who cajoles you into making a cherry pie along with the pumpkin pie?

What if your family is crazy and decides to forgo turkey in favor of flying in barbeque from Austin, as the Dellingers did in 1989?

What happened to the coffee? More importantly, what if you prefer drinking … um … something different?

Now, to the Farm Bureau’s credit, they have a simple reason for excluding all these variables: They wanted to keep the shopping list the same every year in order to maintain the price comparison’s integrity. They’ve been doing this fun little exercise since 1989, when Butterballs were hip and the Slow Food movement hadn’t gone mainstream. Their Thanksgiving shopping list is a fairly typical non-Dellinger 1989 shopping list. But it probably bears little resemblance to your shopping list.

This wrinkle isn’t unique to the Farm Bureau’s list—it is the main problem with all gauges of consumer prices. Whether we’re talking the Labor Department’s Consumer Price Index (CPI), the Commerce Department’s Personal Consumption Expenditure Price Index (PCE) or MIT’s Billion Prices Index, an inflation gauge is only as good as the underlying basket of goods and services. It measures your personal cost of living only if you buy all the same goods and services in the exact proportion as their index weight. Actually, it would be rather bizarre if CPI measured your cost of living, as that would require you to do each of the following annually:

  • Buy eyeglasses
  • Buy a car
  • Be hospitalized
  • Pay college tuition
  • Buy sports equipment

You’d also need to pay rent, even if you own your home outright. And drink wine. And smoke.

This is why even the Labor Department doesn’t pretend CPI is a cost-of-living measure. As they state quite plainly in their FAQs: “It is unlikely that your experience will correspond precisely with either the national indexes or the indexes for specific cities or regions.”

CPI, PCE and their ilk are fine statistics. They do an ok job of measuring prices across the entire economy, which can help policymakers judge whether money supply is growing too fast (or too slow). But they don’t give you much information about your own life, and if you’re trying to make a financial plan—and budget for expenses over the next several years—broad CPI won’t be much help. You’re likely better off looking at the individual categories (e.g., health care, food, education, etc.), seeing which are most relevant to you, and weighing them accordingly. But that is not good for press releases.

Happy Thanksgiving. 

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.