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CPI less food + energy

Here's a comparison of the inflation rate for the CPI less food and energy, and the inflation rate for food and for energy. As you can see, rising energy prices by themselves don't seem to lead to higher inflation down the road. Ditto food prices. They will however make the overall CPI more volatile than otherwise. Their noise, statistically, so eliminating them doesn't change the bottom line while making the bottom line easier to see. Go to the BLS charts page and click on CPI vs CPI less food and inflation to see the difference.

 
 

Here is "core" inflation (the CPI less food and energy) versus (i) healthcare services, (ii) new car prices and (iii) apparel prices. On average the latter two have been flat (+0.1% for cars) or falling (-0.3% for clothing). Old houses didn't have closets. New ones have walk-in closets. In contrast over the past 20 years overall "core" inflation has been 2.0% ("headline" everything included inflation has been 2.2%). Healthcare has averaged 3.8%. That means that over the past 20 years "core" prices rose 50%, while healthcare prices more than doubled [compounded 20 times = (1.02)^20 vs (1.038)^20 in Excel]. That makes sense: out of the past 241 months, the prices for healthcare services rose faster than core inflation in all but 4 months.

3 thoughts on “CPI less food + energy

  1. bernsteinl20

    I find it fascinating how much quicker health care costs rise, compared to inflation in the United States for other goods. With the struggles our country has with health care, I wonder how much the rapidly rising costs are causing these problems or if they just pile onto an already struggling system.

    Reply
    1. minsong20

      It appears that the instability in the insurance markets affects the dollar. Likewise, health seems vital to our economy.

      Reply
  2. samuelm20

    I understand the reason for the volatility of the energy trend, and therefore the reason it has been deemed noise, but I am not quite clear on why food has been presumed likewise. Is the trend of the food CPI a result of harvesting seasons/ weather patterns which affect the cultivation of food?

    The rise of medical costs definitely raises a point about the need for accommodation/ aid services to help dampen the effect of these trends on those with incurring medical obligations (both in terms of bills and necessary treatment).

    Reply

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