The BLS produces multiple CPI indexes each month, two of which include the “headline” CPI, which is All Items CPI for All Urban Consumers (CPI-U), and the “core” CPI, which is CPI-U for All Items Less Food and Energy. Specifically, inflation is predicted to be 7.9% year-over-year as of October, according to a median forecast of 52 economists surveyed by Bloomberg News. Banks including Citigroup, Deutsche Bank, JP Morgan Chase and Wells Fargo have similar projections. “When is the next CPI report?” was a question no one was asking back in the days of 2% inflation readings. The BLS is committed to providing data promptly and according to established schedules. Automated retrieval programs (commonly called “robots” or “bots”) can cause delays and interfere with other customers’ timely access to information.
- The trend in home prices, or shelter costs, is likely to be decisive in shaping August’s CPI figures.
- The Consumer Price Index for All Urban Consumers (CPI-U) represents 93% of the U.S. population not living in remote rural areas.
- While an inflation rate decrease would be good news, there needs to be a streak of consecutive months of steady declines before we can say inflation is under control, McBride says.
- “Clearly the CPI is very important. In this particular case, it does have fairly direct policy implications, which are about the size of the next Fed rate hike.”
- Though the CPI is widely used as a tool to evaluate the overall health of the economy, it has limitations in what it reports and who it represents.
The culprit behind this inflation drama is energy prices, with Bank of America blaming a 5.9% surge in energy costs as the main driver for the headline increase. As the traditional CPI-U calculation only measures inflation for urban populations, it remains a less-than-reliable source of data for individuals ichimoku kinko hyo living in rural areas. In addition, the CPI does not explicitly state how different demographics may be impacted by inflation. For example, soaring education costs may adversely impact younger individuals, while the impact of increasing elderly care costs is felt by a different group of individuals.
The BLS detailed tables show price changes for a variety of goods and services organized by eight umbrella spending categories. As mentioned earlier, the basket of goods and services used in the CPI calculation is a composite of popular items commonly purchased by Americans. The weight of each component of the basket is in proportion to how they are sold. The annual CPI is reported as a whole number, and the figure is often greater than 100 (assuming current market prices are appreciating). The Consumer Price Index for All Urban Consumers (CPI-U) represents 93% of the U.S. population not living in remote rural areas.
Inflation is expected to have declined in December, but it may not be enough to stop the Fed
The inflation data will certainly influence what the central bank decides to do at the next Fed meeting. The FOMC resumed rate hikes when it last met in July, increasing the short-term federal funds rate by a quarter of a percentage point. That would support the Fed’s concerns that the inflation battle is not over. However, though inflation nowcasts are useful and sometimes superior to other inflation estimates, in recent months they have tended to overestimate inflation. For example, we have started to see some disinflation in shelter costs in 2023 so far. As a large component of CPI, lower housing costs may help drive inflation lower.
The CPI report is broken down into many subcategories, but the two main ones you’ll hear most about on CPI day are headline CPI and core CPI. Core CPI excludes volatile food and nft stocks energy prices, and is considered to be a better predictor of future inflation. The data are expressed as percent changes, and are measured both month-to-month and year-over-year.
The Fed is still watching the data closely for trends here, though recent data has been fairly encouraging. This key economic metric is based on prices that consumers pay for goods and services throughout the U.S. economy. The percentage change in CPI over a period of time is referred to as the inflation rate. In addition to the headline data, there is also something called “core CPI” inflation.
“The annual core rate of inflation has increased the past three months and is running at the hottest pace in 40 years,” McBride says. While an inflation rate decrease would be good news, there needs to be a streak of consecutive months of steady declines before we can say inflation is under control, McBride says. Nonetheless, there are some, early signs that major prices whether for housing or food is starting to moderate. However, the strength of those trends and whether they start to appear in October’s CPI Report remains to be seen. The concern that is once energy prices level off, the Fed will be left with higher inflation than it wants to see. It’s those prices beyond energy that are more predictive of medium-term inflation trends.
The Worry With September’s CPI Report
Grocery prices rose more modestly, edging up 0.3% and lowering the yearly increase to 3%. The cost of commodities such as wheat and corn generally have fallen because of easing global demand, though drought and wildfires in the western U.S. recently have crimped supplies and nudged some prices higher. Although wage growth recently started outpacing inflation, many Americans say they aren’t feeling the benefits. September CPI sent stock prices down nearly 4%, which marked the worst day for stocks thus far in 2022. However, it’s important to note that this price move represented a correction from an overbought market that erased the 4% gains from the prior week. The latest numbers from the Consumer Price Index (CPI) report come out tomorrow, and inflation is expected to remain high.
Inflation Nowcast
“Everyone is familiar with the lag that it takes for the data to show up in the CPI,” Tilley added. “We think there could be a sharper slowdown.” Shelter costs are 40% the macro trading floor of core CPI. “It’s amazing how much reaction and overreaction there is for one single data point,” said Simona Mocuta, chief economist at State Street Global Advisors.
Trends will also be noted in the CPI report about how the most recent findings compare over time, for both individual indexes and the overall inflation rate. CPI is calculated by tracking the change in the prices of a fixed basket of goods and services. Over the years, the CPI has frequently drawn criticism that it has either understated or overstated inflation. Because the CPI is based on consumer spending, it doesn’t track third-party reimbursements for healthcare and significantly underweights healthcare relative to its proportion in the GDP as a result.
Consumer Price Index (CPI) Categories
The CPI is widely used by financial market participants to gauge inflation and by the Federal Reserve to calibrate its monetary policy. Businesses and consumers also use the CPI to make informed economic decisions. Since CPI measures the change in consumers’ purchasing power, it is often a key factor in pay negotiations. The inflation rate can be calculated for a given month or annual period; in either case, the appropriate new and prior period must be selected.
The Atlanta Fed’s Wage Growth Tracker shows that data falling back from peak levels, but still running at an annual rate of over 5%. A continued rise in services prices is another issue that might make the Fed more likely to raise interest rates again in 2023. The monthly CPI report starts with a summary of the findings, including how much inflation either increased or decreased for the month prior, followed by the average change in prices over the past 12 months.
Bureau of Labor Statistics
The September CPI, which reported the rise in consumer prices for all urban consumers for August 2022, came in at 8.3%, which is slightly higher than the consensus forecast of 8.1%. The Federal Reserve has “ways to go” in bringing down inflation, Fed chairman Jerome Powell said, citing last month’s inflation data. That will hopefully be done through continued interest rate hikes, which discourage spending. Prices accelerated in the report for the month of August, so the data for September will be closely watched. There are some signs that the housing market is softening as mortgage rates have increased dramatically, however, how and when this plays out in the CPI report remains to be seen. However, since spring 2023, home prices in aggregate have somewhat rebounded.
If Thursday’s report is worse than expected, the prospect of another “jumbo” 0.75 percentage point interest rate increase in December is more likely. Most forecasts currently assume a December rate hike of 0.5 percentage point, the probability of which was 52% as of Wednesday afternoon, according to the CME FedWatch Tool, which measures rate hike probabilities. Food price inflation has been on a tear but the good news is that there’s a chance it is starting to moderate. Also, there is a question concerning to what extent and how rapidly falling farm prices, if they hold, translate into declining food costs for end consumers.