The stock market took a hit this morning, as the Producer Price Index turned back to deflation, dropping 0.2 percent in December and 0.1 percent in 2015 (Table I). Health prices are still growing faster than other prices. This is especially true for pharmaceuticals, for which prices increased 8.2 percent last year, versus a 3.7 percent decline in prices for final demand goods. Although political attacks on pharmaceutical prices are misguided, it is likely they will continue as long as this situation persists.
With respect to services, health price inflation is not as extreme. However, the jump of 1.3 percent for physician prices in December is remarkable.
It was an idiosyncratic jump. Nevertheless, physician prices have increased by 0.7 percent over the last year. In a generally deflationary environment, that suggests doctors are not suffering as much in the post-Obamacare world as is sometimes claimed. This would make it harder to repeal Obamacare outright (unless, of course, the prices are increased only to finance more compliance and bureaucracy in physicians’ offices, instead of flowing into physicians’ net income.)
Health prices in general are rising: Of 14 health prices in Table I, only three declined in December, and only two over the year.