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What is behind the change in the gap between services price inflation and goods price inflation?

Author

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  • Ferrara, Luigi

Abstract

Services price inflation tends to be much higher than non-energy goods price inflation. However, the gap between the two has become smaller since the financial crisis. This phenomenon has coincided with the corresponding decline in the gap between unit labour cost growth in the services sector and manufacturing, driven by the decline in unit labour cost growth in the services sector. Overall, the narrowing of the gap between services price inflation and goods price inflation has been a major feature of lower HICP inflation excluding food and energy. However, this measure of underlying inflation would have declined even more had the weight of the services component not changed. JEL Classification: E31, C43, O47

Suggested Citation

  • Ferrara, Luigi, 2019. "What is behind the change in the gap between services price inflation and goods price inflation?," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2019:0005:5
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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/focus/2019/html/ecb.ebbox201905_05~c78bb049be.en.html
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    Citations

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    Cited by:

    1. Lodge, David & Pérez, Javier J. & Albrizio, Silvia & Everett, Mary & De Bandt, Olivier & Georgiadis, Georgios & Ca' Zorzi, Michele & Lastauskas, Povilas & Carluccio, Juan & Parrága, Susana & Carvalho,, 2021. "The implications of globalisation for the ECB monetary policy strategy," Occasional Paper Series 263, European Central Bank.
    2. Gent Bajraj & Guillermo Carlomagno & Juan M. Wlasiuk, 2023. "Where is the Inflation? The Diverging Patterns of Prices of Goods and Services," Working Papers Central Bank of Chile 969, Central Bank of Chile.

    More about this item

    Keywords

    Balassa-Samuelson effect; goods price inflation; services price inflation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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