Big changes in store for how feds calculate inflation

Big changes in store for how feds calculate inflation

Say goodbye to the old PPI.
Starting in 2014, inflation at the wholesale level will be measured by the government in an entirely new way.
Fear not, though. American consumers and investors suddenly won’t be confronted with news that inflation is much higher than it’s been reported. The big do-ever in the producer price index is unlikely to make large alterations in the inflation outlook.
So why is a government agency notoriously prone to caution undertaking the switch? Simple. The old producer price index focused entirely on the price of goods even though the U.S. has become a service-dominated economy.
The new formula will incorporate price changes in services such as health care, financial advice, housekeeping, commuting, food delivery and the like. That’s the most important adaptation.