Question: As a manager, one of your responsibilities is to monitor recent changes in inflation. However, the recent statistics appear to be quite confusing. The CPI rose only 0.1%, but the PPI for finished goods increased 0.8%. A further examination of the core rates shows a gain of 0.2% in the CPI and 0.5% in the PPI.
(A) What further information would be required to determine the underlying rate of inflation?
(B) Suppose the core rate for the intermediate rate rose 0.1%. How would that affect your answer?
(C) What other components of the CPI and PPI would you examine closely to try and narrow the discrepancy?