In response to criticism of the U.S. government’s inflation measures, Goldman Sachs has their own relatively new ‘Diffusion Index’, which is meant to give a better picture by not over-weighting housing and rental prices as government statistics are accused of doing.
Overall, their Diffusion Index remains above the 50-level, which indicates that there is some inflation happening. But this caught our eye — if you look at the breakdown by category of product/service, then their data shows that half of America’s industries, or at least the products & services produced by them, are still experiencing price deflation:
In March, prices in 88 of these 179 categories fell and 91 rose. Carving out food, which accounts for 62 of the categories, prices in 59 areas of the economy fell while 58 rose.
The chart below shows the aggregate index. Any reading below 50 indicates overall deflation while any reading above indicates inflation, but to us the category-by-category detail is probably the better way to gauge inflationary pressures in the U.S. economy. It’s pretty wild to imagine that prices are falling for half of the price categories out there. It shows that the U.S. is far from stoking major inflation through low interest rates.
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