Courtesy of Doug Short
Note from dshort: I’ve update the charts below to include the January Consumer Price Index data fromte from the Bureau of Labor Statistics.
As the charts below illustrate, core CPI and core PCE are both well below the Federal Reserve’s 2% target, sometimes referenced as a 1.75%-2% range.
The December 0.7% core PCE was the lowest ever recorded. October’s 0.6% is the lowest core CPI ever recorded. However we’ve seen some divergence between the headline and core numbers for both indicators, and the latest CPI data for January shows a distinct uptick in both the core and headline number.
The Bureau of Labor Statistic’s Consumer Price Index and The Bureau of Economic Analysis’s monthly Personal Income and Outlays report are the main indicators for price trends in the US. The chart below is an overlay of core CPI and core PCE since 2000.
Here is a long-term perspective from the actual beginnings of the two series.
For some technical data accounting for the differences between the two, see this comparison article from the BEA.
Naturally in the real world, we can’t exclude food and energy from our monthly expenses. But the extreme volatility of these two categories, especially energy costs, often obscures the underlying trend, which is the focus of the chart above. For evidence of the volatility, see this overlay of headline and core CPI and this one of headline and core PCE.
Fuel on the Fire of Inflation Analysis
One the other hand, the volatile price of gasoline explains why so many people are angered by the exclusion of food and energy from core measures of inflation, as this chart of the past decade makes perfectly clear.
