What it measures
The Cost Disease Spread reads the structural story that William Baumol named in 1967 — the categories where productivity is hard to scale (hospital beds, college lectures, child care, housing) get more expensive at a different speed than the categories where it is easy (televisions, computers, toys, wireless service). The HowMuch "20 Years of Price Changes" chart that goes viral every year or so is the visual. This index is the metric. We read year-over-year price change across two baskets: **Inflating services (50% weight)** - CPI Hospital Services (12%) - CPI Housing (12%) - CPI College Tuition and Fees (10%) - CPI Medical Care Services (8%) - CPI Child Care and Nursery School (8%) **Deflating goods (50% weight, negatively signed)** - CPI Televisions (12%) - CPI Wireless Telephone Services (10%) - CPI Toys (10%) - CPI Computers, Peripherals, Smart Home (10%) - CPI Household Furnishings and Operations (8%) Each component contributes its YoY percent change. Inflating components add. Deflating components subtract. The weighted sum is normalized to a 0-100 sigmoid centered on the trailing five-year baseline. Up means services are pulling further away from goods (cost disease accelerating). Down means goods are catching up (deflation or the Baumol effect moderating).
How to read it
- 0-25: The spread is compressing. Goods inflation catching services, OR services deflation. Unusual and worth interrogating. - 25-50: Below long-run pace. Services running below typical premium over goods. - 50-75: Cost disease at its historical run-rate. The default state of US CPI since 1998. - 75-100: Cost disease accelerating. Services pulling away aggressively. Watch for political response — healthcare, college tuition, and child care are the typical pressure points.
Source
All ten components are BLS Consumer Price Index subindices. Five route through FRED via the daily fred-sync cron (hospital, medical, housing, food, toys, computers, furnishings); five route through BLS direct via the bls-sync cron because FRED doesn't republish them at this depth (college tuition, college textbooks, child care, wireless telephone, televisions). Source: BLS Consumer Price Index, U.S. City Average, All Urban Consumers (CPI-U).