September 2024 Inflation Breakdown: Goods vs. Services in One Chart
AInvestThursday, Oct 10, 2024 12:21 pm ET
1min read
Inflation trends in September 2024 reveal a divergence between goods and services, with services inflation remaining stubbornly high. This article explores the factors driving this divergence and the role of housing and shelter costs in services inflation.


The chart below illustrates the inflation breakdown for September 2024, highlighting the disparity between goods and services inflation.


1. **Supply chain disruptions and labor market dynamics**: The divergence in inflation rates between goods and services can be attributed to supply chain disruptions and labor market dynamics. Goods inflation has largely throttled back from pandemic-era highs as supply-and-demand dynamics unwind. However, services inflation, particularly shelter costs, has been slow to recede due to factors such as housing market dynamics and labor market conditions.
2. **Housing and shelter costs**: Housing, which falls into the "services" category, plays a significant role in driving services inflation. The shelter index rose 0.4% in May 2024, marking the fourth consecutive monthly increase. This is due to factors such as increased demand for housing and supply constraints. To address this, policymakers could consider initiatives to increase housing supply and improve affordability.
3. **Temporary factors**: Temporary factors, such as weather, disease, and war, can influence inflation in specific categories. For example, a sweeping bird flu has caused egg prices to spike, contributing to a 0.2% monthly increase in food prices. While these factors may have a temporary impact on inflation, their overall effect on the broader economy is limited.

Policymakers, such as the Federal Reserve, must adapt their strategies to manage inflation effectively in both goods and services categories. This may involve targeted policies to address specific factors driving inflation, such as housing affordability and supply chain disruptions. By understanding the underlying dynamics of inflation, policymakers can better navigate the complex landscape of goods and services inflation and promote economic stability.
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