Here are the main inflation indicators heading to the big CPI report on Wednesday
Inflation, which was at its highest since the early 1980s, may have cooled off a bit in July, but it is still increasing at a very rapid pace. On Wednesday, markets will get a look at a key data point that will show exactly where price pressures hit in August — the July Consumer Price Index report, which looks at a broad basket of goods and services to gauge the cost of living. Economists polled by Dow Jones expect headline inflation to rise 0.2% from June and 8.7% from a year ago. If this estimate is correct, it would lift the CPI off its highest level since November 1981, but it is still close to levels well above anything the US has seen in decades. Using food and energy, the so-called core CPI is expected to post a monthly profit of 0.5% and an annual rate of 6.1%. The acceleration of fundamental data could be bad news in that it shows inflation is expanding, while a slightly slower pace in the headline will mainly reflect a sharp drop in gas prices. To get a better handle on where things stand, CNBC.com took a look at dozens of indicators to show where the situation stands in the direction of Wednesday’s CPI release: ISM Manufacturing and Services Price Indices: ISM’s most recent metrics provide the same figures for July. In manufacturing, the price index was 60%, while services scored 72.3%. Both metrics reflect the percentage of companies that say prices are going up. In June, the relevant indices came in at 78.5% and 80.1%, which means that while the vast majority of companies are still paying higher prices, the level is slowing down. Atlanta Fed Constant Consumer Price Index: The metric looks at the cost of goods that don’t tend to fluctuate much in price. For June, the one-month constant annual rate was 8.1%, a record in the 10-year data set. Conversely, the elastic CPI was at 41.5%, surpassing its highest level in March. Dallas Fed Inflation Cut: The central bank branch takes CPI data and puts out extreme readings at both ends of the range. This reading for the 12-month PCE inflation rate was 4.3% in June, the highest since April 1983. (The Fed prefers to use PCE rates over CPI). For June, it clocked 6.8% for the headlines and 4.8% for the PCE core. Labor costs per unit: The measure looks at hourly compensation versus productivity and was at 10.8% for the second quarter of the prior period. The 9.5% reading in the fourth quarter was the highest since the first quarter of 1982. Gas Prices: After rising to nominal record highs above $5 a gallon, prices have fallen at the pump over the past month. As of Tuesday, the average gallon was $4.03, down 66 cents from last month, or 14%, according to the AAA. However, it is still well above last year’s level of $3.19. Atlanta Federal Reserve Wage Growth Tracker: During June, the three-month moving average showed a 6.7% gain from a year ago, a record for a series of data going back to March 1997. Job creators were doing particularly well, with 7.9% increase. Average hourly earnings: The BLS reported last Friday that while payroll growth is fast, so are wages, with average hourly earnings up 5.2% from a year ago. BLS Labor Cost Index: The measure, which the Fed monitors closely as it smooths data for synthetic effects, rose 5.1% in the second quarter, a record gain for data going back to 2002. Average real hourly earnings in the BLS: Unfortunately, big Wage gains were not enough to keep up with the cost of living. Inflation-adjusted hourly earnings fell 1% in June and are down 3.6% over the past year. New York Fed Survey of Consumer Expectations: A closely watched gauge of consumer confidence showed a significant drop in inflation expectations. July poll respondents saw inflation rising 6.2% annually from now and 3.2% in three years, down from the relevant June readings of 6.8% and 3.6%. And while they were moving in the right direction, these numbers are still well above the Fed’s long-term target of 2%.