Inflation Rate MoM

Inflation Rate MoM is the 1-month seasonally adjusted percent change in CPI-U, the Consumer Price Index for All Urban Consumers. The Bureau of Labor Statistics prices about 80,000 items monthly in 75 urban areas covering about 93% of the US population. Prices come from the Commodities and Services survey and the Housing Survey, with weights from the Consumer Expenditure Survey.

Retail prices began in 1919, the national index in 1921 back to 1913, and CPI-U in January 1978 with reference base 1982-84 equal to 100. It excludes house purchases, stocks, bonds and income taxes. Area indexes track change within each area, not price levels between cities.

Prices are collected across the whole reference month in 3 pricing periods, with fuels and some items priced monthly in all 75 areas. BLS releases a report around mid-month after the reference month at 8:30 ET. Each release brings tables, a database and 4 index series: CPI-U, CPI-W, C-CPI-U and average prices.

Use the 1-month adjusted change for momentum and the 12-month unadjusted change for contracts. Core, the index without food and energy, tracks the trend. CPI-U is final at release with corrections only for errors, but adjusted history for the prior 5 years is revised with the January release.

Weights below are November 2024 relative importance, shares of spending, and update each January.

• Shelter, 36.707%: cost of shelter services, including rents and owners' equivalent rent, an imputed rental value for owned homes.
• Food, 13.483%: prices for food at home, groceries, and food away from home, meals at restaurants and cafeterias.
• Energy, 6.442%: motor fuel, electricity and piped gas, a small share with the largest monthly swings.
• All items less food and energy, 80.075%: the core measure tracking underlying inflation without volatile food and energy.
• Commodities less food and energy commodities, 18.347%: new and used vehicles, apparel and medical care commodities.
• Transportation services, 6.586%, and medical care services, 6.542%: vehicle insurance, repair and airline fares, plus doctor and hospital services.

In the July 13, 2022 release for June, the adjusted headline rose 1.3% after 1.0% in May, while the 12-month unadjusted rate reached 9.1%. Energy rose 7.5% and drove nearly half the rise, with gasoline up 11.2%, while core rose only 0.7%. Shelter rose 0.6% as rent rose 0.8%, yet lodging away from home declined and airline fares fell 1.8% inside the hot headline. The lesson is that a hot 1.3% month can rest on 1 volatile part while core runs cooler and single parts fall.

1. Basic indexes: for each of 7,776 item-area cells, 32 areas times 243 items, compute a 1-month price relative. A price relative is the ratio of the current price to the previous price.
2. Geometric mean, multiplying ratios then taking the root: most cells use an expenditure-weighted geometric mean of price ratios across quotes.
3. Laspeyres, an arithmetic averaging method: listed shelter, utility and medical groups use a modified Laspeyres ratio of average prices.
4. Rent: rent and owners' equivalent rent use a 6-month chained estimator, with the 1-month move as the sixth root of the 6-month ratio.
5. Aggregation: basic indexes combine through a modified Laspeyres formula with spending-based weights refreshed each January. The monthly change divides the current index by the prior index.
6. Seasonal adjustment: X-13ARIMA-SEATS, a statistical seasonal filter, removes normal seasonal patterns, with factors re-estimated yearly and 5 years revised each January.
7. Headline MoM: divide the adjusted all-items index by the prior index, subtract 1 and multiply by 100. For example, 300.000 then 301.200 gives plus 0.4%, which is about 4.9% at a yearly pace that BLS does not publish.