I apologize in advance if this blog makes your head explode. But apparently it is no longer enough to focus on the headline CPI or even core CPI. CPI wonks are focused on the “supercore” [SUBSCRIPTION REQUIRED] ahead of tomorrow morning’s much anticipated December CPI Report, according to a WSJ article by Sam Goldfarb.
Let’s take a step back. Why the distinction between headline and core to begin with? Because core strips out volatile food and energy prices to give a supposedly more pure reading of underlying inflation. The “supercore” strips out even more prices to give an even purer read on inflation. Think of it as the Platonic form of Inflation.
Core inflation itself is divided into goods and services inflation. And while goods inflation is rolling over, services inflation is staying stubbornly high – supposedly because of the hot jobs market. Core goods inflation was -0.5% in November while core services inflation was 0.4%. You can also see the divergence between goods and services inflation in the chart at the top of this blog – though that graph depends on different inflation data than the CPI.
But even core services inflation isn’t pure enough for some wonks. They want to strip out other prices as well like housing, medical care and/or transportation. I’m not sure what’s left after you strip all these prices out but suffice it to say that tomorrow morning some wonks will insist on focusing on core services inflation excluding shelter.