Click on the image to enlarge it.
This chart shows that the PPI for final demand follows the CPI minus housing very closely. By both measures, inflation is now largely under control. The problem is that the housing CPI is up 5.6 percent, so the overall CPI looks pretty hot.
Some would say that leaving out housing is misleading, because housing represents a very large portion of a typical household budget. On the other hand, the housing CPI is well known for being a lagging indicator of rents due to the way it is constructed and other factors. more current series show no recent rent inflation. This last argument places me in the optimistic inflation camp.
By the way, I recently bet with my friend Larry Ball that the headline CPI from February 2024 to February 2025 would increase by less than 2.5%. I’m writing the bet here as a sort of contract. We will come back next year.
The bet is $5. This is in nominal terms. So in real terms, I get more if I win than Larry gets if he wins.
