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Inflation persists during the epidemic era

Chain services inflation after January 2020 was more persistent than non-durable goods inflation (0.68 vs. 0.38). Core inflation in the services sector, excluding housing, is less durable at 0.50.

figure 1: Chain CPI overall inflation (black), core (tan), non-durable goods (green), services (red), core services except housing (light blue), all annualized. NBER-defined recession peak-to-trough dates are in gray. Source: Bureau of Labor Statistics, Pavel SkrzypczynskiNBER, and author’s calculations.

Interestingly, while the durability of nondurable goods was about the same pre-pandemic versus post-pandemic, the durability of services was higher in the more recent period (0.68 vs. 0.42). In other words, the ranking of inflation persistence by category does not change over the sample period as one would expect because persistence is not a structural parameter.

In summary, the m/m inflation AR(1) coefficient for each category (2020M01-2023M09) is:

  • Title: 0.54
  • Core (52% of total): 0.65
  • Durable goods (12% of total): 0.68
  • Nondurable goods (26% of total): 0.38
  • Services (62% of total): 0.68
  • Core services outside shelter (27% of total): 0.50
  • BLS Super Core (42% of total): 0.58

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