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I guess it’s nice that President Biden is taking some comfort from this morning’s monthly inflation report (for June) from the Labor Department. I’m sure not. Nor should you be.

The President does acknowledge that the increase in the headline Consumer Price Index (CPI) is “unacceptably high.” But he also insists that it’s

out-of-date. Energy alone comprised nearly half of the monthly increase in inflation. Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices, that have reduced the price at the pump by about 40 cents since mid-June. Those savings are providing important breathing room for American families. And, other commodities like wheat have fallen sharply since this report.”

The overarching problem is that these improvements undoubtedly stem from an economy that’s not only slowing dramatically, but that already may have entered a recession. Partly that’s because the Federal Reserve is raising interest rates (which makes borrowing costs more expensive for individals and companies) and partly that’s because inflation is finally showing signs of making many goods and services literally unaffordable at their current prices.

And when growth slows (or of course slips into reverse), the condition of most households and businesses worsens. Overall buying goes down, overall selling goes down, the employment picture darkens (either in the form of weaker hiring, smaller wage gains and even decreases, and often both), and the the typical American family’s well-being either stagnates or deteriorates.

This may be the medicine the nation needs to take to cure “unacceptable” inflation. But as I observed two weeks ago, let’s not view these kinds of results, even if the alleged inflation progress continues, as any great triumph of economic policymaking.

And how much inflation progress really is revealed in today’s report?

On a monthly basis, the overall CPI jumped by 1.32 percent in June. That’s the biggest such surge since July, 1980’s 1.33 percent. It’s also a substantial increase from May’s 0.97 percent.

As known by RealityChek regulars, year-on-year figures are usually more valuable than month-on-month results, since they show trends over a longer time frame and therefore are less prone to often random fluctuations.

Since June, 2021, headline CPI has advanced by nine percent. That’s the worst upswing since November, 1981’s 12.63 percent, and also a robust increase since May’s 8.52 percent. It’s also the greatest monthly acceleration in the annual overall inflation rate (5.63 percent) since March’s 8.22 percent.

To be sure, Mr. Biden based his take on inflation not only on the assumption that energy prices will keep falling. He also noted that “what economists call annual ‘core inflation’ came down for the third month in a row, and is the first month since last year where the annual ‘core’ inflation rate is below six percent.”

This measure of inflation strips out food and energy prices because they’re supposedly volatile for reasons having little do with the economy’s fundamental vulnerability to inflation (like the problems in these sectors created by the Ukraine War). And the President is correct about the most recent yearly results.

But even assuming that food and energy prices don’t regularly bleed into and affect headline inflation (not a remotely realistic assumption IMO), President Biden has forgotten about the baseline effect – which can distort results over any time period if the relevant comparison figure is out of line either to the upside or downside.

RealityChek regulars know that this statistical phenomenon has been throwing off all the inflation figures for most of the time since the CCP Virus’ arrival in force in early spring, 2020 – which sent price increases way below their trend rates. As a result, once the economy started recovering, business’ ability to regain their normal levels of pricing power produced yearly inflation totals that were above normal.

But this baseline effect has vanished for core inflation. As recently as this past January, that month’s annual core inflation number of 6.04 percent could be partly explained by the fact that between January, 2020 and January, 2021 (the baseline number) the core rate climbed by just 1.52 percent – well below the two percent overall rate considered a sign of economic health by the Federal Reserve, which is regarded as the federal government’s lead inflation-fighting agency.

The baseline figure for this June? It’s 4.45 percent – more than twice as high as the Fed target. And the baseline figure for last December – the last month, as Mr. Biden correctly noted, when annual core inflation fell short of six percent? It was just 1.60 percent. So if anything, the new June annual core CPI reading is signaling that this kind of inflation has acquired a life of its own.

Further strengthening this argument: On a monthly basis, core inflation rate has sped up since March. Indeed, it’s more than doubled, from that month’s 0.32 percent.

The next set of official inflation data comes out tomorrow, and is especially important because it measures changes in wholesale prices as opposed to the CPI, which tracks consumer inflation, and because whenever these wholesale prices go up (as they did strongly last month), you can bet consumer prices will follow closely behind. These Producer Price Index (PPI) numbers will also indicate whether the President’s confidence that core inflation is indeed slowing meaningfully, and that the headline numbers are out of date, are reality-based or not.