Before we can tell the story about favorable supply shocks, I should note that 1996 featured an unusual coincidence of adverse supply shocks. First, the minimum wage was increased; this should boost overall wage gains, labor costs and hence prices. Second, both food and energy prices increased faster than other prices.
As a result of the food and energy price increases, there were wide gaps between overall and core measures of inflation for both the PPI and the CPI. The overall CPI increased about ¾ percentage point more than the core CPI and overall PPI increased more than two percentage points faster than core PPI.