Last night in The Closer we reviewed the BLS report on March CPI reported yesterday, including a couple of interesting long-term sources of inflation that have decelerated dramatically of late.
Two categories have long been a source of angst for consumers and policymakers for their persistent gains: medical care goods and tuition/child care. Prior to the last couple of years, it was extremely unusual for the prices of medical care goods to drop more than 1% or so below their prior record high. Instead, we saw slow and persistent price gains. Since COVID hit, though, prices have plunged by a record of more than 3% from their highs. The drivers are two-fold. First, after huge price gains relative to overall inflation for most of their history, prescription drug prices, which account for the largest weighting in the sector, have barely budged over the last couple of years.
The second factor behind the decline has been what is likely to be a temporary sharp drop in medical equipment and supply prices.
Turning to tuition, the steady above-headline growth of the cost of school has been a permanent feature of American life for decades, but that has started to shift. Tuition and childcare prices were actually negative year-over-year at one point in 2020, and demographics mean that the student cohorts are gradually getting smaller; college inflation may be starting to leave the picture after years of consistent pressure. Start a two-week free trial to Bespoke Institutional to access all of our analysis and market commentary.