Consumer prices rose 0.2% in August as annual inflation rate hits lowest since early 2021

[progree]

3. Graphs. And a discrepancy in the BLS numbers on 12 month inflation

The inflation situation as of the release of the CPI on 9/11/24. Here is a summary table followed by the graphs.

I annualize them all to be easy to compare to each other, and to compare to the FED's 2% goal. I use the actual index values rather than the one-digit changes that are commonly reported in the media. Links to the data are with the graphs.

ALL the numbers are the seasonally adjusted ones

The "1 month" number is the change from June to July expressed as an annualized number. Except the CPI (today's report) is the increase from July to August, also annualized.

The "3 month" number is the growth over the last 3 months (and then annualized). It is calculated based on the change in the index number between the latest one and the one 3 months previous. e.g. if the latest index value is 304 and the one 3 months previous is 300, then the 3 month increase is 1.333333%
. . . (304/300 = 1.01333333 => [subtract 1 and multiply by 100%] => 1.333333%)
Annualized, it is 5.4%
. . . (1.01333333^4 = 1.0544095 => [subtract 1 and multiply by 100%] => 5.44095% => 5.4%).
. . . Most people just multiply the 3 month increase by 4 to annualize it: 1.333333%*4 = 5.333333% => 5.3% which isn''t technically correct (it leaves out compounding) but it is close for small percentage changes.

"Regular" is the "headline" number that has "everything"

"Core" is the regular with food and energy removed (The Fed prefers this as a basis for projecting FUTURE inflation)

Finally, the main summary table
All are seasonally adjusted and ANNUALIZED
PCE-Personal Consumption Expenditures Price Index (Fed's favorite inflation measure)
CPI-Consumer Price Index (retail)
PPI-Producer Price Index (Wholesale prices)
Links to the data are with the graphs below



. . ^^----- this is the discrepancy I mentioned in my title line

Average real (i.e. inflation-adjusted) hourly earnings are up over the past 2 years and are above the pre-pandemic level:
. . . # Real average hourly earnings of production and non-supervisory workers: https://data.bls.gov/timeseries/CES0500000032
. . . # Real average hourly earnings of private sector workers: https://data.bls.gov/timeseries/CES0500000013

And now the graphs, in the following order:

* Core CPI and Regular CPI

* Core PCE and Regular PCE (Core PCE is the Fed's favorite for projecting FUTURE inflation)

* Wholesale inflation - Core PPI and Regular PPI

CORE CPI through August that came out 9/11/24
CORE CPI (seasonally adjusted) http://data.bls.gov/timeseries/CUSR0000SA0L1E
BLS CPI news release: https://www.bls.gov/news.release/cpi.nr0.htm



The Regular aka Headline CPI through August that came out 9/11/24 (CPI=Consumer Price Index)
Regular CPI (seasonally adjusted) https://data.bls.gov/timeseries/CUSR0000SA0
BLS CPI news release: https://www.bls.gov/news.release/cpi.nr0.htm



Some Additional CPI Series of Interest
Shelter, which is pretty much all rent -- either regular rent or "owners' equivalent rent", has been a problematic issue -- because changes in new rents take several months before they appreciably move the CPI (because of the inertia of 11 months of older rents). It is the largest component of the Core CPI and one of the largest of the regular CPI. Through August, shelter remained elevated at 0.4% month over month for several months, except for a smaller 0.2% increase in June., and a larger 0.5% increase in August. Year-over-year, shelter is up 5.2%

Shelter: https://data.bls.gov/timeseries/CUSR0000SAH1

Core Inflation less Shelter: https://data.bls.gov/timeseries/CUSR0000SA0L12E
^--This is up 0.0% for 3 months in a row, followed by +0.1% in August. The 3 month annualized average is +0.0% (compare to core of +2.1%)

Click on "More Formatting Options" on the upper right hand of screen, and on the page that appears, choose some or all of: "1-Month Percent Change", "3-Month Percent Change" and "12-Month Percent Change".

Headline CPI and Fed Rate Action

November 2019 through August 2024

The first tentative little quarter point rate increase was March 17, 2022, 12 months after year-over-year inflation went north of 2% in March 2021, and had reached 8.5%.

I'm fond of the 3 month averages as they are an average of 3 data points (so can't be easily dismissed as a "one off", unlike a single month-over-month figure), and they have much more recency than 12 month averages (yoy). I think of them as kinda a smoothed version of month-to-month.

FedFunds Target Rate (I used the upper end of the 0.25% width bracket): https://www.federalreserve.gov/monetarypolicy/openmarket.htm

CORE PCE through JULY that came out 8/30/24 (PCE=Personal Consumption Expenditures price index)
CORE PCE (seasonally adjusted): https://fred.stlouisfed.org/series/PCEPILFE
BEA.gov News release: https://www.bea.gov/ and click on "Personal Income and Outlays" or "Personal Income"

This is the one that the Fed weighs most heavily. The Fed weigh the PCE more heavily than the CPI. And in both cases, they weigh the CORE measures higher than the regular headline measures for projecting FUTURE inflation



Regular PCE through JULY that came out 8/30/24
Regular PCE (seasonally adjusted): https://fred.stlouisfed.org/series/PCEPI
BEA.gov News release: https://www.bea.gov/ and click on "Personal Income and Outlays" or "Personal Income"





WHOLESALE INFLATION (PPI - the Producer Price Index)

https://www.bls.gov/news.release/ppi.nr0.htm

As for which core PPI measure, since the BLS highlights the one below (without food, energy, and trade services) in its reporting (as opposed to the one without food and energy), then I guess I should do likewise. Trade services bounce around a lot from month to month, so I think excluding them from a core measure is the right thing to do.

CORE PPI (excluding food, energy, trade services) through July that came out 8/13/24:
CORE PPI (seasonally adjusted) http://data.bls.gov/timeseries/WPSFD49116



===========================================================

Regular PPI through July that came out 8/13/24 ( includes "everything" ):
Regular PPI (seasonally adjusted) http://data.bls.gov/timeseries/WPSFD4