Friday, January 30, 2009

I am suspicious about the Investment deflator

This morning the BEA said that price of investment goods went up in Q4. This was especially true for nonresidential structures (7.4% annual inflation rate) and for equipment (3.4% annual inflation rate).

Their equipment inflation estimate may hold up -- the PPI for capital equipment went up every month of Q4.

I am dubious about the structures inflation. The PPI for construction went down every month this quarter. I would think that residential and nonresidential construction prices would move together. Fixing that could turn today's estimate of -3.8% per year GDP growth (for the quarter) into a revised -3.5%.

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