Slowly but steadily, inflation rates in many parts of the world are rising. In the case of the United States, they have already reached levels just below 3%. A closer look at the composition of US inflation offers some interesting insights, as our 'Graph of the Week' shows.
Prices continue to increase at a steady pace in the services sector and, with some volatility, also for non-durable goods. Prices for durable goods, however, have experienced an interesting trend: having risen in the 80s and early 90s, they suddenly reversed and, on average, have continued to fall since the mid-90s.
Several factors come to mind that could help explain this trend: globalization could contribute to the descent as well as technological progress. However, what is even more surprising is the fact that – despite the drop in prices – the producers of the goods are still managing to maintain their profit margins. This is a good indicator of solid productivity gains in this sector.
However, further reversals should not be ruled out. China's deflationary shock on durable goods, for example, is probably already past its peak. At the same time, technological advancement in the form of artificial intelligence could slow price increases in the services sector. Don't expect inflation to become a boring subject anytime soon.
