Long Term Perspective

The GDP price index is the broadest measure of price inflation faced by consumers and producers, yet it gets less attention than the CPI or the employment cost index (ECI). During the recent recession, ECI inflation exceeded the other two and GDP inflation outstripped CPI price inflation. GDP has some components with typically high productivity such as producers' durable equipment, software, and nonresidential construction.  During early 2009, energy turned the headline CPI negative but that reversed in the final quarter of 2009 on a year-ago basis and accelerated in early 2010 on a year ago basis, and remained high into mid-2011.  A slower recovery kept inflation down in 2012 and through 2014.

 

 

Short Term Perspective

The ECI came in at a 2.3 percent annualized rate in the fourth quarter, a little lower than the 2.7 percent in the third quarter.  The CPI has whipsawed the last two years on swings in oil prices.  In the fourth quarter of 2014, the headline CPI decelerated to minus 0.9 percent from 1.2 percent the prior quarter.  The GDP price index showed economy-wide inflation in the fourth quarter slowing to 0.1 percent, compared to 1.4 percent in the third quarter.  The fourth quarter and third quarter swings in the GDP price index were largely related to oil prices.  Separately, the GDP price index includes sluggish components of residential and nonresidential structures not found in the CPI or ECI.