Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / The Funflation Trap Why Staying Home Costs More Now
Transcript
- Lucas: Luna, have you seen this headline from CNBC yesterday — 'funflation hits home'? It's about how staying in is actually costing more than going out these days. Luna: I did see that. And I gotta admit, it made me do a double take. Because for years, the conventional wisdom was that cooking at home or streaming a movie was the cheap option. Lucas: Right. And that assumption is getting flipped on its head. The data from the May CPI report — the most recent we have, released in June — shows that the basket of goods and services associated with staying in has been rising faster than the basket for going out. Luna: So what exactly is in the 'staying in' basket? I'm guessing streaming subscriptions, takeout, maybe some home improvement? Lucas: Exactly. Think about it: streaming services, grocery delivery fees, meal kit subscriptions, takeout and delivery, utility costs from being home more, even things like home office equipment and furniture. The Bureau of Labor Statistics doesn't officially track a 'stay-at-home' category, but economists have been stitching one together from sub-components of CPI. Luna: And what's the inflation rate they're seeing for that basket? Lucas: Over the past twelve months through May, it's around 4.3 percent. Compare that to the 'going out' basket — restaurants, bars, live events, travel — which is running at about 3.1 percent. So the gap is roughly 1.2 percentage points. That's significant. Luna: So the pandemic-era shift to nesting hasn't reversed. People got used to staying home, and demand for at-home experiences stayed elevated, which pushed prices up. Meanwhile, the dining and travel sectors had to compete harder for customers, keeping their price increases lower. Lucas: That's the story in a nutshell. And there's a specific data point I want to highlight. The 'food at home' index — that's groceries — is up 2.8 percent year-over-year. But 'food away from home' — restaurants — is up only 2.1 percent. So for the first time in a long while, grocery inflation is outpacing restaurant inflation. Luna: I noticed that too. It's almost cheaper to go out for a burger than to buy the ingredients and cook it yourself, if you factor in time and energy costs. Lucas: And that's before you add delivery fees and tips if you're ordering in. The takeout and delivery segment is a big driver. The CPI for 'limited service meals and snacks' — that's fast food and takeout — was up 5.1 percent year-over-year in May. That's way above overall inflation. Luna: And streaming? I feel like every month there's a new price hike. Lucas: You're not wrong. The CPI for 'cable and satellite television and radio service' — which includes streaming services now — rose 4.7 percent year-over-year. But that's the official number. In reality, many households are seeing bigger jumps because of what I call 'bundle bloat'. Luna: Bundle bloat — I like that. You mean how streaming services keep adding tiers and forcing you to pay more for the same content you used to get? Lucas: Exactly. It's a form of shrinkflation, but for subscriptions. The price per service goes up, and the content library often shrinks or gets fragmented across platforms. So you end up subscribing to three or four services to get what one or two used to cover. Your total outlay goes up way more than the CPI suggests. Luna: And that's not even counting the hidden costs. Higher electricity bills from being home more, more wear and tear on appliances, maybe even needing a bigger internet package. Lucas: Right. The 'household energy' index was up 3.3 percent year-over-year. And 'internet services' — that's up 2.5 percent. Individually they're modest, but when you add them all up, the at-home lifestyle gets expensive. Luna: So what does this mean for the Fed? They're looking at core PCE, which came in at 2.6 percent in May, still above their 2 percent target. But if a big chunk of that inflation is driven by people choosing to stay home, is that something monetary policy can even address? Lucas: It's a great question. The Fed's tools — interest rates — work by cooling demand across the board. But the demand for staying home is partly structural, not cyclical. People changed their preferences during the pandemic. Working from home is still common. The Fed can't really make people want to go out more. Luna: So they might have to accept that some inflation is here to stay, because it's baked into how we live now. Lucas: Exactly. And that's why you hear more Fed officials talking about 'supply-side' solutions, like easing zoning laws to build more housing or reducing regulations that raise costs. Because demand-side solutions have limits when the inflation is coming from lifestyle shifts. Luna: Speaking of lifestyle shifts — I want to ask you about something I noticed in the CPI data. The 'recreation' category includes things like pet supplies, sports equipment, and toys. That's been up 3.6 percent. That's also part of the staying-in basket. Lucas: Absolutely. People are investing in their home environment. They're buying higher-end coffee machines, putting in home gyms, upgrading their gardens. That's all part of the same trend. And those are durable goods, so once you buy them, the price is locked in, but the maintenance and consumables add up. Luna: And you know, this reminds me of a conversation we had a while back about shrinkflation. It's not just that prices are rising — you're getting less for your money in subtle ways. Like streaming services removing content, or takeout portions getting smaller. Lucas: That's the insidious part. The CPI tries to adjust for quality changes, but it's imperfect. If your Netflix bill goes up but the content library shrinks, has the price really gone up? Yes, but the CPI might not fully capture the value loss. Luna: So the true cost of staying home is probably higher than the official numbers show. And that makes the choice to go out more rational than it used to be. Lucas: Right. And we should note: this isn't about blaming people for staying home. It's about understanding the real trade-offs. If you're trying to save money by staying in, you might not be saving as much as you think. And that's important for household budgeting. Luna: I think that's a really valuable takeaway for our listeners. And it ties into something I've been thinking about — this show is all about helping people make sense of the economy in their daily lives. We don't run ads, and that's intentional. We want the information to be free and accessible. Lucas: Exactly. And if you find value in that, and you want to support keeping it that way, you can do so at buy me a coffee dot com slash fexingo. It's a simple way to help us keep doing what we do. No pressure, just an option. Luna: Yeah, it's a small gesture that goes a long way for us. And we really appreciate everyone who's already supported us — it's what keeps this ad-free model viable. Lucas: Alright, back to funflation. One more angle I want to explore: the generational divide. Younger people, especially Gen Z, are more likely to stay home and spend on digital experiences. Millennials are a mix. Boomers are going out more. So the inflation impact hits different age groups differently. Luna: That's a great point. If you're a renter in your twenties, you might not be renovating a home office. But you're paying for multiple streaming services and ordering takeout. Your personal inflation rate could be well above the official CPI. Lucas: And if you're retired and own your home, your biggest costs might be utilities and groceries, which are rising faster than overall inflation. So even retirees are feeling the stay-at-home pinch. Luna: So what's the outlook? Do you see this trend reversing as we move further from the pandemic, or is it permanent? Lucas: I think it's partly permanent. Remote work is here to stay for a significant portion of the workforce. That means people will continue to invest in their home environment. But some of the funflation might ease as competition increases — more streaming services launch, more delivery options, etc. However, I don't see prices coming down. They'll just rise more slowly. Luna: So the new normal is that staying home is a lifestyle choice that comes with a cost. And we should all factor that into our budgets. Lucas: Exactly. And the key is to be mindful. Maybe you don't need four streaming services. Maybe cooking from scratch is cheaper than ordering in, even if groceries are up. There are still ways to save, but you have to be intentional. Luna: And that's the kind of practical insight I hope our listeners take away. Thanks for digging into this with me, Lucas. Lucas: Always a pleasure, Luna. Until next time.