Source: Bloomberg Visual Data

From Bloomberg Visual Data:

A weakening in price growth over the past two years can largely be blamed on muted costs for health care, cars, clothing and financial services. Core PCE inflation running at 1.09 percent owes much of its small climb to housing-related prices. The rise in those costs, including rent, has begun to slow, keeping a lid on inflation.

Category: Digital Media, Inflation

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13 Responses to “Why Has Core Inflation Slowed?”

  1. Qubera says:

    So it looks like the cost of Health Care services has declined. This doesn’t seem in line with the cost of health care policies.

    • willid3 says:

      well it might considering that a lot of the insurance policies that were for sale, weren’t worth the money that was paid for them. so if the insurance company doesnt expect to pay for any services at all, you can cut the premium, but if you actually expect to have pay claims, well now you actually have to account for that.

  2. ch says:

    Because non-core inflation has accelerated. When the price of food, energy, education and healthcare rise at double digit rates in aggregate against flat income growth, you have less money to spend on the items that are counted as “core inflation.”

    • willid3 says:

      that can explain it. and considering that we only track cost not how much we buy (consider if you could afford a 20 oz drink before but now for that same price you get a 10 oz one, has the actual cost gone up ? no, but if all you track is that, you miss the rest).

    • Futuredome says:

      food and energy have not been rising much either.

  3. Regardless of particular sectors and the relative roles they play…

    How does the velocity of money (or the lack of it) and the distribution of income and wealth affect inflation?
    What happens if and when that velocity goes up?
    (which we desperately need)

    Its a complex dance.

    • Futuredome says:

      the velocity of money is already rising. your problem is not understanding the global mechanism and demographic mechanisms.

  4. wally says:

    Limited demand.
    The people who would spend money most quickly, who would keep it circulating, are no better off than they were 6 years ago. Instead, money has moved to the quiet estates of the very wealthy, where it accumulates and slumbers.
    That’s what happens in a middle-class consumer-driven society (which all developed economies are) when you begin to diminish that middle class.

    • Futuredome says:

      demand will always be limited. the boomers are waving goodbye. hence, demand is not so limited.

  5. Futuredome says:

    Demo, demo, demo people. People don’t want to admit demographic changes.

    1. Inflation is just gonna struggle to rise, even with expansive economic growth due to little pressure globally due to a high pool labor. Alot of areas have tried to slow down to prevent inflation and have had success.
    2.Obamacare was meant to be a patch on slowing down health care inflation and it is doing what was intended. It will eventually run out, but that is down the road.
    3.Energy/food prices have stopped rising whether people want to admit that or not.
    4.less demand is needed to create income growth. that means less jobs, growth needed for young/middle aged people to enjoy the same benefits their parents/grandparents did, except it is those parents/grandparents who’s benefits will become a burden down the road.

    “Inflation” is no longer the target. Debt inflation is……….and it is starting to rise again which means higher economic growth. It must be stopped once it moves past GDP.

    • ch says:

      FutureDome – you must not do your own grocery shopping or buy your own healthcare.

      Obamacare premiums rose 30-100% in most cases. That’s a ton of inflation, whether .gov calls it inflation or not. And I am hearing more of the same is coming, b/c to your point on demographics, we made $100T of promises to 78m Baby Boomers and we don’t have the money…

      As far as when debt growth moves past GDP? If we post a GDP growth # above the yield on the 10-yr UST for more than a couple qtrs., I suspect that the bond market will very quickly crap itself…therefore, whether GDP growth is above the 10-yr or not, it will “massaged” to be below it… :)

      • wally says:

        “Obamacare premiums rose 30-100% in most cases. ”

        Huh? Can you cite a reference or two on that?

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