This chart from today's Early Look by Keith McCullough shows the spread between the GDP Deflator number and U.S. CPI quarterly averages.
In the most recent report, the U.S. government understates the GDP Deflator by almost 200 basis points to goose headline GDP, eh!
Embedded in the headline +3.1% Y/Y US GDP report was a +2.6% plug for inflation. Headline CPI was +3.4% Y/Y in December (+3.24% Y/Y for 4Q) while Core CPI was +3.99% Y/Y in 4Q = 54% higher than the implicit GDP Deflator. And, of course, to report “Real” GDP, you subtract the Deflator from nominal GDP.
Nothing to see here.
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