Why You Should Always Account for Inflation: A Case Study

| Thu Sep. 27, 2012 1:51 PM EDT

Ryan Chittum points out a good example today of how misleading news reports can be when they fail to account for inflation. Here's a sentence from a recent Wall Street Journal piece on cell phones:

Americans spent $116 more a year on telephone services in 2011 than they did in 2007, according to the Labor Department, even as total household expenditures increased by just $67.

And here's what that sentence would look like if those numbers were adjusted for inflation:

Even as total household expenditures plummeted by $4,146, spending on phones continued to rise, with Americans shelling out $22 more a year on telephone services in 2011 than they did in 2007, according to the Labor Department.

So the Journal missed a bet. The gist of their piece is that phone bills are eating up a bigger chunk of middle-class incomes, and for my money, the inflation-adjusted figures make that point a lot better. After all, which is more dramatic? Spending $116 more while incomes are flat, or spending $22 more even as your income falls through the floor? Your mileage may vary, but I'd choose the latter.

Not that it really matters. The inflation-adjusted figures are the more accurate ones. Whenever possible (and with occasional exceptions for specific reasons), they're the ones you should always use.