Inflation in August was low. That makes four months of low inflation.
Posted on September 13, 2024

The inflation report issued Wednesday showed a fourth month of low inflation. The 12-month inflation rate was 2.6% for the most widely reported seasonally-adjusted measure; that’s a decline from 2.9% last month. And 12-month inflation will likely decline again with next month’s report: inflation in September will replace a relatively high rate of inflation in September 2023.

 

Core inflation, which excludes more volatile food and energy components is running at 2.7% annual rate for the last six months and was 3.3% over the past year. Core inflation is closest to the Fed’s favored measure of inflation, PCE, that will be reported for August at the end of this month.

 

I display a table and six graphs that I’ve use to follow the trends in inflation. I add a graph that shows Social Security COLA will likely be 2.5%.

 

 

Details:

 

The two most widely-reported measures of inflation are Seasonally-adjusted inflation and Core inflation.

 

Seasonally-adjusted inflation is the most widely reported measure of inflation: the measure for the last four months averages to an annual rate of 0.9%. We have to go back more than four years to find four months lower. The rate over the last 12 months was 2.6%.

 

 

Core inflation excludes volatile energy and food components. This is similar to the measure favored by the Federal Reserve. Inflation for the last four months average to an annual rate of 2.0%. We have to go back more than four years to find four months lower. The last six months aim at an annual rate of 2.7%. The rate for the last 12 was 3.3%.

 

 

Personal Consumption Expenditures (PCE) excluding Food and Energy is the measure of inflation that the Federal Reserve Board favors. The graph shows the data ending July; the data for August is issued at the end of this month. The last six months aim at an annual rate of 2.6%. Inflation for the last 12 was 2.6%.

 

 

== History of 12-month inflation ==

 

Full-year inflation measured by CPI-U shows that inflation for the last 12 months continues a downward trend. Inflation for the last 12-months was 2.5%. Next month’s inflation for September will replace a relatively high September ’23 in the 12-month calculation.

 

 

== Social Security COLA: 2.5% likely ==

 

Social Security (SS) uses different measure of inflation, CPI-W, to calculate the Cost-of-Living-Adjustment (COLA) for 2025. Inflation has been 2.4% for the last 12-months. SS uses the average change in annual inflation for the three months of July, August, and September, and I estimate that COLA will be 2.5%.

 

 

== Producer’s Price Index ==

 

The change in producer prices will impact consumer inflation. PPI for August declined. The rate for the last six months is 0.5%. Inflation for the past 12 months was -0.8%..

 

 

== Services ==

 

Inflation for services was 0.4% in July, greater than the prior three months. The last six months average to an annual rate of 4.0%. Inflation for the past 12 months was 4.9%.

 

 

 

Conclusion: Monthly inflation in August was the fourth month of low inflation. We have to go back more than four years to find four months that were lower. The last six months of Core Inflation are at an annual rate of 2.7%.