Consumer Price Inflation Methodology
Predicated on the values-based statement: publicly accessible.
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Inflation can have multiple causes. One of the causes most easily resolved is seller's inflation, sometimes called greedflation, because it results simply from the choice of companies to raise prices without an underlying cost-justification. In an inflationary period, any time the year-to-year change in a company’s gross profit per unit outpaces the year-to-year change in broader-market pricing, a company is likely contributing to inflation. Gross profit per unit is determined by dividing a company’s gross profit by the number of units the company has sold. If a company’s annual gross profit per unit rate of change (gain) is outpacing the year-to-year inflation rate, it's likely because the company has decided to increase its prices without a cost-justification.
In the United States, publicly traded corporations are required to report their annual revenue and and costs to the Securities and Exchange Commission (SEC), typically through a statement of consolidated financial information. These SEC-reported revenue and cost figures represent publicly accessible, directly measurable and independently verified data points for inclusion in a Spendwell ranking. This data is typically reported at a corporation’s fiscal year end. This Spendwell ranking is predicated on the values-based statement that a corporation should not increase prices without a cost-justification.
Corporations with year-to-year gross profit per unit changes that are closer to or lower than the year-to-year inflation rate, as determined by the Consumer Price Index (CPI), rank higher than those company’s with greater year-to-year gross profit per unit gains. Currently, spendwell reports on the last three available years of a company’s revenue and costs history, measuring the rate of change between the first and second years, and then again between the second and third years. The rate of inflation determined by change in the CPI was 4.7% between 2020 and 2021 and 8.0% between 2021 and 2022, per the US Federal Reserve Bank (Minneapolis). Companies are ranked on the average of these two year-to-year rates of change, which is currently 6.35% (2020-2022).
In some reporting instances, Spendwell’s rankings will include private companies with no current revenue or cost information publicly available. These companies might be included in a report, but will be listed as not disclosing unless they have voluntarily published the necessary annual financial information and Spendwell has been made aware of its publication. A non-disclosing company will be ranked lower than companies publicly disclosing financial information. All ranked corporations are ranked based on the previously mentioned data reported to the SEC through end-of-year or annual reports, which can be accessed through the SEC’s Edgar search tool here:
Search for a company by name to view its filed 10-k reports.