Sunday, April 15, 2012

Real Services

The following chart shows how much more expensive services are to us than they were in 1956 (in inflation adjusted dollars).

Click to enlarge.

Over the past decade, the bull market in commodities has created pricing pressure for our service economy. Picture the consumer having to choose between filling their gas tank or eating at one of this country's many restaurants.

As seen in the chart, this also happened in the 1970s.

Hoarding physical goods has not protected one very well against services inflation over the long-term (especially medical expenses). What will happen in the future? It all depends on whether or not we resume the failed exponential trend. I am not convinced one way or another. On the one hand, oil is no longer cheap. Our massive trade deficit has come back to haunt us. On the other hand, natural gas is cheap. There seems to be an abundant supply.

I can say this. If we don't resume the trend, then
garbage bags for the long-term win. As of today, they are up about 30%. Sigh.

See Also:
Services vs. Goods (Musical Tribute)

Source Data:
St. Louis Fed: Custom Chart


Stagflationary Mark said...

Note that the real services chart is roughly the mirror image of the real apparel prices chart.

It's not a coincidence as I tried to show here.

Scott said...

Services incorporates health care costs, which American workers that do have employer provided health insurance have received massive annual raises in lieu of base wage increases.

Stagflationary Mark said...