McFlation index as a CPI check

The Economist had an interesting article concerning a new index from a UBS economist to check the inflation rates in the street versus official inflation numbers. Called the McFlation index, it looks at the price change of Big Macs around the world and compares against official inflation rates.

Now comparing one item against a basket is never a good way to check inflation statistics, but it does provide a nice universal measure of a good with multiple inputs. The data suggest that Argentina and Brazil inflation is much higher than measured by official numbers while Russia and Indonesia may have over-reported the inflation rate over the last ten years.

This is not a good measure to make any inflation bets, but it does focus on a simple good traded all around the world. Food costs have gone up in all countries so a general increase in meat would not bias the numbers. It is something to watch in the coming year to see if the Big Mac inflation index tells us more about relative inflation against official announcements.