At 20:30 on June 12, 2024, Singapore time, the U.S. Department of Labor will announce: U.S. May unadjusted CPI annual rate, U.S. May seasonally adjusted CPI monthly rate, among which the U.S. May unadjusted CPI annual rate is more concerned by the market.
Release frequency: Once a month
Data meaning: The US Consumer Price Index (CPI) is an indicator that measures changes in the price level of a basket of goods and services and is used to reflect inflation. Understanding the relationship between the annual rate (monthly year-on-year) and monthly rate (month-on-month) of CPI can help us better understand the trend of inflation. The following is the difference and relationship between them:
1. CPI annual rate (monthly year-on-year)
Definition: The percentage change in CPI compared to the same month last year.
Calculation method: For example, the CPI annual rate in May 2023 is calculated by comparing the CPI in May 2023 with the CPI in May 2022.
Significance: It reflects the overall trend of price changes within one year and is an important indicator for measuring long-term inflation.
2. CPI monthly rate (month-on-month)
Definition: The percentage change in CPI compared to the previous month.
Calculation method: For example, the CPI monthly rate in May 2023 is calculated by comparing the CPI in May 2023 with the CPI in April 2023.
Significance: It reflects the short-term trend of price changes within one month and is an important indicator for analyzing recent inflation changes.
How do media use CPI data?
When reporting CPI data, some media may selectively use monthly or annual rates to attract attention. For example:
Emphasize the annual rate: If the annual rate rises significantly, the media may highlight this and the headline may be "Annual inflation rate reaches X%, setting a new record high."
Emphasize the monthly rate: If there are unusual fluctuations in the monthly rate (such as a one-time surge or sharp drop), the media may take advantage of this and the headline may be "Prices soared X% this month."
Selective interpretation: Sometimes the media may ignore relatively stable monthly changes or over-interpret annual changes to create a sensational effect.
example
Assume the following CPI data:
May 2022: 100
April 2023: 105
May 2023: 107
Calculation method:
Annual rate: (107 - 100) / 100 * 100% = 7%
Monthly rate: (107 - 105) / 105 * 100% = 1.9%
In this case, the media might report "annual inflation rate of 7%" to emphasize the long-term high inflation trend, while ignoring the fact that the monthly rate is only 1.9%, or vice versa.
Understanding the difference and relationship between the annual and monthly CPI rates can help us understand inflation data more comprehensively. It can also help us look at media reports more rationally and avoid being misled by exaggerated headlines.
Data impact: If the published value is less than the expected value, for example: the published value of the US unadjusted CPI annual rate in May is 3.3% < 3.4%, and the published value of the US seasonally adjusted CPI monthly rate in May is 0.1% < the expected value of 0.3%. This is bad news for the US dollar and good news for non-US currencies. It is bad news for Treasury yields. It is good news for expectations of interest rate cuts and bad news for expectations of interest rate hikes. It is good news for risk markets and virtual currency markets.
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Data source: Jinshi Data
*Not intended as investment advice
