Sunday, March 05, 2023

Some differences between the CPI and the PCE (measures of inflation)

See Fed Might Be Winning Inflation Fight, Depending on Index Used by Gwynn Guilford of The WSJ. 

The CPI is the Consumer Price Index and is put out by the Bureau of Labor Statistics.

The PCE is the Personal-Consumption Expenditures index and is put out by the Commerce Department.

Excerpts:

"Housing makes up around 33% of CPI, more than twice its share in PCE."

"medical care services make up 16% of the PCE, contrasted with just under 7% in CPI"

[Energy] "It makes up around 6.9% of the CPI, compared with around 4% of the PCE."  

"The indexes measure medical-services prices differently. The CPI’s measurement technique for health insurance means it will be a deflationary drag on overall inflation through September or October. Excluding health insurance, the CPI’s index of medical-care services prices rose 3.2% in January from a year earlier. Healthcare in the PCE price index, which doesn’t include health insurance, increased 2.1%."

Related posts: 

How Housing and Health Insurance Affect The CPI With Lags

How Does The Fed Prefer To Measure Inflation? 

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