Friday, December 16, 2016

PPI: Health Prices Tame, Inflation Picks Up

November’s Producer Price Index rose 0.4 percent. However, prices for most health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.* The major exceptions were prices for pharmaceutical preparations, which increased 0.4 percentage points more than prices for final demand goods less food and energy; and nursing homes, for which prices increased 0.3 percentage points more than prices for final demand services less trade, transportation, and warehousing.

Prices of health goods for intermediate demand, were lower than their benchmark. Perhaps slow price increases for medicinal and botanical chemicals, and biological products will flow through to prices of pharmaceutical preparations but that has not previously been the case.

Over the last twelve months, prices of nine of the 16 health goods and services have increased slower than their benchmarks. Three stand out as having increased significantly more than their benchmarks: Pharmaceutical preparations (7.0 percentage points), biological products (1.8 percentage points), and dental care (1.7 percentage points).**

(See Table I below the fold.)


*The benchmarks are the core measurements under which the health measurements are found. That is, final demand goods less food and energy is the benchmark for the three measurements (pharmaceutical preparations, X-Ray and electromedical equipment, and medical, surgical, and personal aid devices) listed under that core measurement; final demand services less trade, transportation, and warehousing is the benchmark for the eight health measurements listed under that core measurement, et cetera.

**Dental care is dominated neither by government nor private insurance, so dental price increases are not explained by NCPA’s usual theory of health inflation. I addressed dental price increases in a previous article.

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