The annual cost-of-living adjustment, or COLA, for Social Security benefits in 2022 — usually announced in October — could be 6% to 6.1%, the highest since 1983, based on Tuesday's Consumer Price Index announcement, according to Social Security and Medicare policy analyst Mary Johnson of The Senior Citizens League, who estimated the 2022 COLA would be 6.2% a month ago.
The latest estimate, which is based on inflation of 0.3% in August, is especially significant as next year's COLA will be calculated on the average of third-quarter, or July, August and September, CPI data.
"This year is particularly difficult to forecast with certainty," Johnson said in a statement, noting that inflation patterns caused by the COVID-19 pandemic are "unprecedented" in her experience. "Price changes due to climate disasters throw a monkey wrench into things on top of the difficulty in watching run up in costs earlier this year," she said.
The consumer price index for all urban consumers in August rose 5.3% over the past 12 months, and 0.3% from the previous month, the Labor Department reported Tuesday. (The CPI includes food and energy.)
Economists polled by Bloomberg had forecasted a 0.4% month-over-month increase and a 5.3% increased compared with a year earlier.
Key components of the increase included the energy index, which rose 2% from the previous month, mainly due to the gasoline index, which rose 2.8%, electricity, which rose 1.0% and natural gas, which rose 1.6%. The food index rose 0.4%, and new vehicle prices increased 1.2% from the previous month.
August's core CPI, which excludes food and energy, rose by 0.1% from July — its smallest increase in five months — and 4.0% from a year ago, according to the BLS. (In July, the core CPI was up 0.3% from June and 4.3% from a year earlier.)
Johnson added: "Based on the new data through August, there's a downward inflation trend. Although my calculator indicates the COLA could be 6.1%, the chances of inflation remaining high enough for that to occur is only 10 percent based on 20 years of historic trends. The data dropping to 6 percent are twice that high, 20 percent. … With the July and August consumer price data, inflation is plateauing."
