--- title: "Expect A Big Divergence This Year Between CPI And PCE Inflation" type: "News" locale: "en" url: "https://longbridge.com/en/news/273243050.md" description: "The divergence between CPI and PCE inflation is expected to widen significantly in 2026, driven by contrasting trends in rent and healthcare costs. While shelter costs are projected to rise modestly, healthcare services may see a substantial increase, leading to a potential 2.2 percentage point difference between CPI and PCE. The timing of these impacts will vary, with PCE reflecting immediate premium hikes, while CPI will lag due to its calculation methodology. This discrepancy highlights the complexities in measuring inflation and the potential implications for economic policy." datetime: "2026-01-21T14:09:34.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/273243050.md) - [en](https://longbridge.com/en/news/273243050.md) - [zh-HK](https://longbridge.com/zh-HK/news/273243050.md) --- # Expect A Big Divergence This Year Between CPI And PCE Inflation Rent and Healthcare go different ways in 2026. Plus there are huge timing issues. Category November 2025 CPI Weight (%) Approximate PCE Weight (%) Key Notes on PCE vs. CPI Difference Shelter (OER + Rent) 33.85 ~16 Much lower in PCE Food 13.66 ~13.5 Very similar Health Care Services 6.78 ~17 Much higher in PCE Health Care Commodities 1.5 ~3.5 Higher in PCE Energy 6.32 ~5 Lower in PCE Other ~36.89 ~45 PCE spreads more to recreation, financial services Total 100.00 100.00 Note: Unlike the BLS CPI, the BEA does not publish PCE percentage weights monthly and the changes are more dynamic. Those are estimates based off consumers expenditures. Category Approx. PCE Weight (%) Hypothetical YoY Price Change Contribution to PCE (pp) Notes Shelter Excluding Utilities 16 0 to 2% 0 to 0.32 PP Big disinflation driver Health Care Services 17 +10% +1.7 PP Dominant upward driver Net Shelter + Health Services +1.7 to 2.0 PP **Recent Estimates, Goldman and Zillow, Per Grok** - Goldman Sachs (Dec 2025 update): PCE housing inflation (which includes shelter) expected to slow to 2.1% YoY by December 2026 (from ~3.4% YoY in Dec 2025). Monthly pace: ~0.16% m/m by end-2026. They cite rapid multifamily supply, rising vacancies, and subdued new lease growth as reasons shelter’s contribution to core PCE shrinks to ~0.4 ppt by end-2026 (vs. ~0.7 ppt recently). This aligns with broader core PCE cooling to ~2.1%. - Zillow Research (Dec 2025 CPI forecast update): - Owner’s Equivalent Rent (OER, major CPI shelter component): +2.9% over 2026 (half-point slowdown from 2025’s ~3.4-3.35%). - Rent of Primary Residence: +2.0% over 2026 (full-point slowdown from 2025). - Multifamily/apartment rents: Essentially flat nationally (~+0.3% in 2026), with single-family rents up ~2.3%. Exceptions like NYC could see acceleration due to shortages. **Potential Discrepancy** If we assume a 10 percent rise in health care and a generous 2 percent decline in shelter, the net impact on the PCE would be 1.7 health care minus 0.32 = +1.38 percentage points. For the CPI, a 10 percent rise in health care and a generous 2 percent decline in shelter, would net 0.678 health care minus 0.677 for shelter (rent + OER) resulting in a wash but only for the BLS. Although ACA is not as important as Medicare plus corporate plans, inaction could add another 0.3 to 0.5 percentage points to the PCE. This is a tough estimate because over a million dropped out and many others switched to bronze plans. We are looking at a setup where difference between the CPI and PCE may be as high as 2.2 percentage points. This estimate assumes Congress will _not_ do something about Obamacare premiums. There are compromises in the Senate, but Trump recent said he may veto them. Momentum has also stalled. Perhaps this is due to the fact that only 1.5 million or so have dropped out. But more are likely to do so over the course of the year. Plus many are switching to Bronze plans. Regardless, despite the surge in support for a compromise, it now appears I got this wrong in the end. KFF estimates Obamacare (ACA) premiums will rise about 26 percent if Trump signs a bill and 114 percent if not. **Timing of 2026 Health Care Impacts** - CPI: Based on 2026 projections, significant increases in health insurance premiums due to expiring tax credits will likely hit the CPI in a spread-out manner rather than all at once, owing to the Bureau of Labor Statistics (BLS) calculation methodology. While consumer “rate shock” is expected to be immediate upon policy renewal, the CPI, which measures the “retained earnings” of insurers, uses a smoothed, 2-year moving average updated semi-annually. - PCE: The PCE directly tracks premiums. When premiums jump on January 1st, that new, higher cost will be reflected in the January PCE data (usually released in late February/early March). Component Main Reset Date Nature of Change PCE Appearance Timing Front-Loading in 2026? Medicare (Part B) January 1, 2026 ~10% premium increase Sharp in Jan data; visible Feb release onward High (YoY peak early) ACA Marketplace January 1, 2026 ~114% net premium jump Step-up in Jan; strong Q1 YoY Very high Employer Corporate Mostly Jan 1, 2026 ~6.5–9.5% overall Spread Q1–Q2; some smoothing Moderate Timing issues will cause an immediate to perhaps a 3-month phase-in to PCE for corporate plans. The CPI will be extremely lagging. Year-over-year discrepancies between the CPI and PCE rate to be huge. We will find out within a month whether this view is accurate. **Related Posts** January 15, 2026: **Real Average Hourly Earnings Have Been Negative for Five Months** > Wages are not keeping up with inflation. January 15, 2026: **Industrial Production Up 0.4 Percent Led by 2.6 Percent Surge in Utilities** > AI Boom. Utilities provided 88.8% of the increase in IP this month. 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