Inflation Up 8.3% in 12 Months In All Items Index
Data for the second month used for calculating the 2023 COLA rate are now available.
According to the Bureau of Labor Statistics (BLS) in its latest 2022 inflation update, inflation was up 0.1% in August after being unchanged in July based on the Consumer Price Index for all Urban Consumers (CPI-U). Over the last 12 months, according to BLS, the all items index (a different index than the CPI-U) increased 8.3% compared to 8.5% in July and 9.1% in June.
The cost of gas was the biggest reason for the slowing inflation rate. Increases in the shelter, food, and medical care indexes were the largest contributors to the monthly figures as other prices continued to go higher. The gasoline index was down 10.6%.
The food index has continued to go up. It increased 0.8% in the past month as the food at home index rose 0.7%. Electricity and natural gas indexes increased. Electricity went up 1.5%, its fourth consecutive monthly increase of at least 1.3%. Natural gas was up 3.5% in the last month.
The overall cost of food rose 11.4%. Groceries are up 13.5% year-over-year. For the overall food category, this figure is the largest increase since May of 1979. For the food-at-home category, this is the largest increase since March of 1979, according to Steve Reed, an economist at the U.S. Bureau of Labor Statistics (BLS). As everyone buys food, this will impact all Americans directly and is noticeable to most of us.
The stock market suffered its worst single day losses in two years in response to the inflation report. The TSP stock funds fell along with the market; the C Fund was down about 4.3% and the S Fund down nearly 4% on September 13.
CPI-W Index Up 8.7% In 12 Months
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is the index calculated by BLS that is of most interest to many FedSmith readers. This index increased 8.7% in the last 12 months.
It is the index of most interest for those who are retired and who receive a federal employee annuity payment. It also is the amount used to calculate the COLA for Social Security payments in 2023.
It is now at an index level of 291.629. For the month of July, the index went down 0.2%.
The CPI third quarter average for 2021 was 268.421. This is significant because the annual COLA is calculated by comparing the change in the CPI-W from year to year, based on the average of the third-quarter months of July, August, and September. This means that the increase over the third quarter average last year is 8.7%.
Last October, when the COLA for 2022 was announced, federal retirees received a 5.9% increase for Civil Service Retirement System (CSRS) annuities and Social Security benefits and a 4.9% increase for Federal Employees Retirement System (FERS) annuities starting in January 2022. At that time, this was the largest COLA increase in 40 years.
The COLA for 2023 will certainly be larger than the 5.9% in 2022. The 2023 COLA calculation will be announced in mid-October.
While the final figure will depend on the latest inflation data, it now appears that the 2023 COLA will be between 8-9%. Last month, Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League, estimated that the COLA for 2023 would be 9.6%. Within a few hours after the latest data were released, this projection was reduced to 8.7%.
COLA Increases Since 2000
The COLA increase of 5.9% for 2021 (payable in January 2022) was the largest COLA percentage since 2008 when it was 5.8%. It was the largest increase since 1982 when the increase was 7.4%.
There is no doubt the COLA that will be calculated next month will be higher than the 7.4% of 1982. The highest COLA payment percentages were 14.3% in 1980 and 11.2% in 1981. It now appears the COLA calculation for 2022 will not match those high figures.
Here is a summary of COLA payment percentages by year starting in 2001.
Army Suggests Using Food Stamps
Inflation impacts everyone and is undoubtedly hardest on those at lower income levels.
A majority of Americans reported last month that price increases were causing financial hardship for their households, according to a Gallup survey recently released. Gallup defined severe hardship as one that jeopardizes a household’s ability to maintain its current standard of living. Moderate hardship was one that affects a household but does not endanger the family’s standard of living.
In one sign of how inflation is impacting many Americans, the U.S. Army is recommending soldiers apply for food stamps, to help cover their rising costs from inflation. (The food stamp program is now referred to as the Supplemental Nutrition Assistance Program (SNAP).
“With inflation affecting everything from gas prices to groceries to rent, some Soldiers and their families are finding it harder to get by on the budgets they’ve set and used before. Soldiers of all ranks can seek guidance, assistance, and advice through the Army’s Financial Readiness Program.”
The Army’s guidance points soldiers to the Supplemental Nutrition Assistance Program and links them to the federal welfare program’s website.
While pay raises for federal civilian employees have not kept pace with inflation, most federal employees would not qualify for the food stamp program. Currently, to qualify for food stamps, households may have $2,500 in countable resources (such as cash or money in a bank account) or $3,750 in countable resources if at least one member of the household is age 60 or older, or is disabled. These amounts are updated annually.