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Why Health Insurance Is About to Help Drag the CPI Lower

Thanks to the uniquely challenging nature of measuring health insurance inflation, we can see what’s about to happen.

The Anthem Inc. Anthem Anywhere application is seen in the App Store on an Apple Inc. iPhone displayed for a photograph in Washington, D.C., U.S., on Saturday, April 21, 2018.

The Anthem Inc. Anthem Anywhere application is seen in the App Store on an Apple Inc. iPhone displayed for a photograph in Washington, D.C., U.S., on Saturday, April 21, 2018.

Photographer: Andrew Harrer/Bloomberg

Inflation data has been surprising to the upside for several months now. But some relief could be on the way from an unlikely source.

US health insurance has helped to push up the Consumer Price Index (CPI) over the past year, with the monthly sequential change in the sector running at more than 2% for several months. According to Omair Sharif, founder and president of Inflation Insights LLC, that’s about to change with readings on the cost of healthcare on course to flip negative as soon as the October reading, which comes out in November.

In an interview with the Odd Lots podcast, Sharif describes the highly idiosyncratic nature of measuring this category, and why understanding the precise methodology makes it clear what’s going to come next. As such, a look at healthcare reveals some of the technicalities and challenges of measuring prices at a time when US inflation is running at its highest level in decades and predicting the future path has become particularly difficult.