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Slowing services inflation


Repeat after me..services inflation is slowing, not rising. In particular, producer price inflation in the “traditional service industries” is only 0.6%, on a year over year basis, down from 1.8% in December.

But you would never know this, from the coverage of today’s PPI report. The majority of the economy is services, not manufacturing. Yet most reporters (slap, there I go again) persist in focusing on the producer price index for goods.

In fact, the BLS producer price index for “traditional service industries” is arguably the best gauge of inflationary pressures that we have. That includes information, healthcare, finance, real estate, legal services, architecture services, management consulting, advertising, employment services, waste collection, computer training, amusement parks, golf courses, fitness centers, hotels, and a few other categories”. Many of these industries are business-to-business, so they don’t show up in the CPI, but they are important neverless.

Here is the year over year growth in producer prices for the traditional service industries.

I like this chart…


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