Consumer Price Index and Real Earnings for sep-2021

 

The BLS has released the September figures for inflation and the many headlines include...

• CPI- U:YOY increase of 5.4%
• CPI-U: Monthly increase of 0.3%
• CPI-W: YOY increase of 5.9%
• CPI-W: Monthly increase of 0.3%

This may be slightly above expectations, but not by much. I had expected the CPI-W increase of 5.9% and the C.O.L.A. at 5.9%

How does this stack up to my on cost of living over the past 12 months...

My results indicate 0.1% increase monthly and 3.3% YOY. Of course, there will be a Medicare premium increase, so that 5.9% will become more like 5.5% increase in real terms. Not bad, after years of falling behind. 

But, a lot of cost cutting took place during that period to get to my current situation. One worrying issue in my current success, is the rate of fall in Medical, which is a large portion of my expenses. I mean it is great on the one hand, but I cannot realistically rely on that becoming a long term trend. 

It should be noted that while the BLS numbers slightly exceeded the forecasts, those same forecasts project higher numbers for next month. 0.4% on the month and 5.7% on the year. Of course, the YOY is stretching back to a period of near stability in the numbers. 

Transitory, supply chain, etc. can be explained away until about February 2022. Below is an expectation of YOY inflation numbers based on two factors. The blue bars indicate the reports of yearly inflation, IF no further inflation is seen through June, 2022. November will be higher than current, before slipping back. The orange represents the yearly inflation based on a simple 0.2% increase per month (2.43% annualized). It indicates December will see a near 6.0% report, before easing back and seeing June as the timing for below 3.0% expectations.

For those drawing Social Security and having the Medicare premium withheld, the average after that premium was $1,594.50 monthly beginning in January. The erosion of purchasing power will result in a net loss of 4.11% of purchasing power ($787.30) over the year. Considering the after premium check from Social Security will be $1,687.34 starting in January... it will require 8 consecutive months of ZERO inflation to recover purchasing power back to level of January, 2021. It would require no more than 1.6% inflation through the entire year of 2022, to maintain purchasing power of January 2021. 

As for the those still in the labor force...

Real hourly earnings are on an uptick, and since the pandemic began is up 2.9%.

However...

Real weekly earnings are up 4.14% in that time period and are on an upswing... similar to hourly rates. 

Of course real earnings, are adjusted for inflation and are earnings before taxes. Just saying... it's like a treadmill at this point, imo.

Up next will be producer prices and this can give an indication of upward pressure on pricing going forward.