Medical Care's Disinflationary Impulse Persistent But Fading

Medical care services prices (6.4% of the CPI basket) saw their 8th negative month in 9 (unrounded at zero, -0.02% M/M) in June. Medical care commodities (1.5% of the CPI basket) rose by just 0.2%, the lowest rate since February and down from 0.6% M/M prior.

• Medical services have been slightly overlooked in the past year but is the largest single services category in CPI outside of shelter, outweighing Education, Transportation, Recreation.
• Its most deflationary period appears to be behind, with June marking the 2nd highest reading for medical care services since Sept 2022.
• The insurance subcomponent has been persistently negative since a methodological change last October and that is likely to reverse in the fall when the methodology changes again; meanwhile higher wages are likely to feed into higher prices in the other subcomponents.
• Also of note, Medical goods are more heavily weighted in PCE than in CPI, and some had expected renewed strength in this category to offset weakness elsewhere - that was not the case, which may restrain imputed estimates of PCE.

Source: BLS, MNI