If analysts' forecasts are correct, August inflation data due Wednesday will be a "something-for-everybody" messaging mess.
Driving the news: The Consumer Price Index data, scheduled for release at 8:30am ET, is expected to show that headline inflation over the previous 12 months increased in August, to 3.6% from 3.2% in the 12 months ended in July.
- Given the tendency of media organizations to emphasize those 12-month numbers, that implies some unwelcome headlines for the Biden administration. But according to analysts surveyed by Bloomberg, the anticipated details look better.
- Core inflation, excluding food and energy, is expected to have fallen on a year-on-year basis, to 4.3% from 4.7%. That would point toward the underlying inflation trend showing the progress the Fed and the White House want to see.
Yes, but: Both those numbers are less-than-helpful in understanding inflation's true trajectory because they are so affected by base effects — what happened to prices over the course of last summer rather than this one.
- This month's data shows why it's important to look at how prices moved last month, or over the last three months, rather than emphasizing backward-looking 12-month numbers.
- And there, the news is anticipated to be mixed, with the headline number expected to rise a too-hot 0.6% — a 7.4% annual rate — reflecting higher energy prices.
- If forecasters are correct, the core number will show steady 0.2% growth, which would confirm the narrative of inflation settling back down.