A Primer on Inflation

I sense the upcoming release of the headline and core PCE price deflators is going to be rather encouraging. Let me tell you why.

The next key data point for the markets doesn’t come out until May 31^st — when we get the April release of the headline and core PCE price deflators. I sense the numbers are going to be rather encouraging, and I’ll tell you why. It is because of the critical components of the PPI that feed into the PCE deflator data.

The culprits on health care services inflation evident in the CPI were not so apparent in the PPI number for April, as health and medical insurance showed a tepid +0.15% MoM gain — the tamest print in three months. Physician care PPI was up just +0.17% (from +0.23% in March), and hospital inpatient care also rose a benign +0.2%. The insurance premium scare dominating the CPI appears to be subsiding in the more forward-looking PPI data, as even property & casualty insurance rates came in at +0.1% (after eking out a small advance of +0.17% in March), and life insurance premium rates were almost stagnant at +0.1% (after a flat March).