Jim’s right to point to gas prices in anticipation of the release of the May inflation report on Friday.
April’s inflation report actually saw a 6.1 percent decline in gasoline prices from the previous month. The surge in gasoline prices we have all seen since then began in the last few days of April.
To collect the data needed for the consumer price index, the Bureau of Labor Statistics conducts surveys on the prices of about 80,000 items. It divides each month into three pricing periods, and “data collectors have discretion within pricing periods, so they can collect quotes at any time during the period,” according to the BLS website.
April was probably a wash for gas prices, with the sharp increase in the last few days of the month erasing a gradual decline over the preceding few weeks. That sharp increase might not have been reflected in the April CPI report if the data collectors surveyed gasoline prices in the beginning or middle of the third pricing period in April. That would simply be a result of the data-collection methods the BLS uses, and that sort of thing is inevitable when you’re in charge of looking after 80,000 prices.
The entire recent surge in gas prices will certainly show up on the May inflation report, though. As Jim notes, the national average price of gasoline, according to weekly Energy Information Administration data, went from $4.18 at the start of May to $4.62 at the end of May, an increase of almost 11 percent. That’s not the same data source the BLS uses to calculate gasoline inflation, but it gives a rough idea of what to expect.
Unlike April, when the gasoline-price index actually helped temper the headline inflation number, gasoline will be a significant driver of inflation for May. Expect the Biden administration to point that out if the headline number is higher than desired.
Because of the short-term volatility in energy prices and food prices, the BLS also releases the inflation number for all items less food and energy. That number, more than the headline rate, is worth keeping an eye on.
In April’s report, the index for all items less food and energy increased by 0.6 percent over March, an acceleration from the 0.3 percent increase in the previous month’s report. That increase came despite a significant decrease in the monthly growth rate of headline inflation, from 1.2 percent in March to 0.3 percent in April. Again, gas prices are a big part of the explanation for that contrary motion.
That’s what made the April report tricky: A measured decline in gas prices led to a slight decrease in the headline inflation rate, while the monthly growth rate of nearly all the non-energy prices either held steady or increased. This time around, gasoline will be up, too. We’ll see what the other prices do.