Inflation Watch – Scott Grannis Edition

Grannis has an interesting analysis which breaks down long term US cost trends between durable goods and services. The result: since 1994 the cost of services trend is steadily rising, while goods fell over the same period. We’ve had both inflation and deflation. A consumer who has been purchasing relatively more services (health care, education, etc) has experienced an erosion of purchasing power. A consumer who has been purchasing relatively more stuff has experienced increased purchasing power. This corresponds to data points that are fairly well established, and also explains the incredulity that so often greets official CPI releases.

It may be significant that so many areas of services are regulated, or subsidized, or transacted via third party payers, relative to goods. I would like to see an analysis along those lines.

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