The CPI index used by the Fed and financial markets captures the spending habits of about 80 percent of the population of the United States. But spending patterns vary across different age groups. For example, older generations spend more on services such as housing and medical care, and less on goods including food, beverages, and apparel.
To better understand these differences in spending patterns, the BLS calculates a CPI index looking at inflation for people age 62 and above. It shows that for older generations, inflation has for decades been higher because of higher inflation in services. But during the pandemic, when inflation on goods was very high, inflation for people age 62 and above has been relatively lower. With goods inflation coming down and service sector inflation still rising, we should expect more convergence between the two inflation measures going forward, a process which has already started in the chart below.
Source: BLS, Haver Analytics, Apollo Chief Economist. Note: It is calculated as the difference between CPI-E which is the CPI for 62 years and older and CPI-U which is for the total basket. Elderly spend more on housing, medical care and less on food & beverages, apparel, transportation, education and communication.
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