Current Annual inflation for the 12 months ending in December 2021 is 7.04%
The inflation rate plays an important role in determining the health of an economy. Countries with extremely high inflation rates are said to have hyperinflation and when this occurs the economy is often near collapse. But even moderate inflation can rapidly erode purchasing power and creates uncertainty as businesses have more difficulty estimating future costs. Usually, high inflation rates also correspond to high interest rates as lenders need to compensate for the decline in purchasing power of future interest and principal repayments. This results in higher costs of doing business and place an overall drag on the economy.
U.S. Annual Inflation Rate in Percent
We calculate the Current Inflation rate (see table below) to two decimal places while the Bureau of Labor Statistics only calculates inflation to one decimal place. Therefore, while being based on the same government Consumer Price index (CPI-U) our data provides a "finer" view.
July thru October 2019 is a perfect example, according to the government statistics July=1.8%, August=1.7%, and September=1.7%. However, our data shows inflation in July as 1.81%, August as 1.75%, September as 1.71%. Therefore instead of the inflation rate being "flat" it is actually falling slightly over this 3 month period. Of course this could just be a statistical anomaly but..
Using this enhanced view we might be alerted to watch for the possibility of a bigger decline... which in this case didn't happen as inflation rates for the following months began rising to 1.76%, then 2.05% and 2.29%, and finally 2.49% in January 2020.
In another example we see August 2003 and September with the Government saying inflation rates were 2.2% and 2.3% respectively. This would lead us to believe that inflation rose 0.1% during that period. In actuality however, it rose from 2.16% to 2.32% or a 0.16% increase, substantially more than 0.1%! Once again this finer view gives us a better picture that inflation might be rising more than it appeared to be.
For a more in depth commentary see Annual Inflation Rate Commentary
Current Annual Inflation Chart
According to the BLS commissioner's report, "The
Consumer Price Index for All Urban Consumers (CPI-U)
increased 0.5 percent in December on a seasonally
adjusted basis after rising 0.8 percent in November, the
U.S. Bureau of Labor Statistics reported today. Over the
last 12 months, the all items index increased 7.0
percent before seasonal adjustment. Increases in the
indexes for shelter and for used cars and trucks were
the largest contributors to the seasonally adjusted all
items increase. The food index also contributed,
although it increased less than in recent months, rising
0.5 percent in December. The energy index declined in
December, ending a long series of increases; it fell 0.4
percent as the indexes for gasoline and natural gas both
The index for all items less food and energy rose 0.6 percent in December following a 0.5-percent increase in November. This was the sixth time in the last 9 months it has increased at least 0.5 percent. Along with the indexes for shelter and for used cars and trucks, the indexes for household furnishings and operations, apparel, new vehicles, and medical care all increased in December. As in November, the indexes for motor vehicle insurance and recreation were among the few to decline over the month. The all items index rose 7.0 percent for the 12 months ending December, the largest 12-month increase since the period ending June 1982. The all items less food and energy index rose 5.5 percent, the largest 12-month change since the period ending February 1991. The energy index rose 29.3 percent over the last year, and the food index increased 6.3 percent."
Of course they round the inflation rate to a single decimal place, we prefer a bit finer view so we round it to 7.04% otherwise had it been 1/100th of a percent higher i.e. 7.05% the BLS would have rounded it to 7.1% instead of saying it was 7.0%.
For an interesting look at prices and wages see the price changes in various components of the Consumer Price Index over the last 20 years.
Seasonally Adjusted Inflation Components Table
Current Inflation Table
The Inflation table above is updated monthly and provides the current Annual US Inflation Rate (not seasonally adjusted) in the right-hand column and the other columns show various monthly components on a Seasonally Adjusted basis. The Inflation rate is calculated using the Current Consumer Price Index (CPI-U) published monthly by the Bureau of Labor Statistics. CPI Index Release DatesFederal Reserve has a constant balancing act to try to reconcile the government's desires for higher inflation with the need for a healthy economy.
In an effort to convince people that inflation is really good, the government has a constant media circus going promoting the benefits of inflation and decrying the evils of deflation--- but what's so bad about falling prices?
Their major argument revolves around the "stimulating" effects of inflation. Basically it makes people feel richer until they eventually realize that each of their dollars now buys less. But in the meantime they tend to spend the "excess". This results in people buying things they wouldn't have, had they realized that their money was actually worth less than they thought. Eventually this results in a monetary "hangover" as the effects of their buying binge become apparent.
Inflation is largely a result of increases in the money supply months or even years previously. Because of this serious lag in the time between the money creation and the time it shows up in the economy the FED must estimate the impact their money creation efforts will have years in advance. The Federal Reserve tries to target a 2% inflation rate but often over or underestimates the effect their actions will have.
The Federal Reserve monitors the inflation rate for its targeting purposes using the "Core Inflation Rate" which excludes food and energy leading some people to mistakenly believe that the U.S. government doesn't track those items in the inflation rate. Actually the Bureau of labor statistics does track them but the FED simply excludes them for targeting purposes because they are volatile and subject to external forces unrelated to the money supply.
We believe a picture is worth a thousand words, so we track the recent inflation rate in chart form to give you a better sense of the current direction of inflation and also the longer term inflation trends.
The inflation rate is calculated using the Consumer Price Index or CPI.
To calculate inflation from a month and year to a later month and year, Try our Inflation calculator.
We also post the previous Inflation Rates in our Historical Inflation Tables. The Historical Consumer Price Index is also available in table format. You can instantly see the current inflation trend in our chart of the Annual Inflation Rate.
Subscribe to our FREE monthly E-zine and we will keep you up-to-date on what is happening in the area of inflation, interest rates and market trends.
You may also enjoy:
- The misery index is an economic indicator designed to help determine how the average citizen is doing economically.
- Which is Better: High or Low Inflation?
- What's the Difference Between the Consumer Price Index and Inflation?
- What is the velocity of money?
Webmasters- We would be happy to have you use any of our charts... please check our usage policy.
Image courtesy of jscreationzs / FreeDigitalPhotos.net
Use our custom search to find more articles like this