When it comes to measuring inflation, rather than focus on the headline number, economists tend to look more at the core reading which factors out the so-called volatile food and energy groups. However, given the growing view that higher oil and food prices are here to stay, some economists suggest that the headline number should be given more attention.
The chart below measures the monthly spread between the y/y headline and core CPI readings. As of the most recent CPI release, the spread between the two increased to 0.7% from -0.1% the month earlier. At current levels, the spread is relatively modest when compared to the historical range. One interesting aspect of the chart is that except for the most recent experience, in every period where the spread widened significantly, the economy subsequently went into a recession.