The inflation report issued yesterday showed another month of low inflation. The 12-month inflation rate was 2.6% for the seasonally adjusted number, but this ran at a 1.6% annual rate for the last six months. The annual numbers likely will not move much until we get to the months that replace the last bulge of inflation this past January-March.
I display a table and six graphs that I’ve used to follow the trends in inflation. Social Security COLA for 2025 benefits is 2.5%.
Detail:
The two most widely-reported measures of inflation are Seasonally-adjusted inflation and Core inflation.
Seasonally-adjusted inflation: this is the most widely reported measure of inflation. The last six months average 1.6%. We’ve not been that low in the last four years. The past annual rate is 2.6%. You can see low inflation in October and November of last year. The 12-month rate might increase a bit until we get to the months that replace the bulge of inflation – generally January through April.
Core inflation excludes volatile energy and food components. This is similar to the measure favored by the Federal Reserve. The last six months aim at an annual rate of 2.6%. The last 12 have been at 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 August; the data for September is issued at the end of this month. The last six aim at an annual rate of 2.6%; the last four aim at 1.8%. The 12-month inflation rate is 2.6%. 12-month inflation won’t decline until we replace the bulge in inflation for the months January through April.
== History of 12-month inflation ==
Full-year inflation measured by CPI-U shows that inflation for the last 12 months continues a downward trend. 12-month inflation is 2.4%. We won’t get back to the low rates of nearly four years ago until early next year.
== Social Security COLA: 2.5% ==
Social Security (SS) uses a different measure of inflation, CPI-W to calculate the Cost-of-Living-Adjustment (COLA) for 2025. The announced increase is 2.5%.
== Producer’s Price Index ==
The change in producer prices will impact consumer inflation. PPI for September nose-dived. The rate for the last six months is -1.0% and has been -2.0% over the last 12 months.
== Services ==
Inflation for services has runs at 3.7% annual rate for the last six months and at 4.8% over the last 12.
Conclusion: Monthly inflation in September was low. We have to go back more than four years to find a string of months that were lower. The last six months of Core Inflation are at an annual rate of 2.6%.
Upcoming 12-month rates for inflation won’t decline much, if at all, for a number of months; inflation was very low for the historical months that will be replaced in the calculation. The next potential decline will be early next year. Those months will replace the historical bulge of inflation months for January, February and March, 2024.