Social Security recipients could get a modest raise next year as inflation cools to 2021 levels, according to calculations Tuesday after May consumer price data indicated inflation is cooling.
The Social Security cost-of-living adjustment is expected to be 2.7%, compared with the 8.7% increase in 2023’s COLA, according to The Senior Citizens League. The pro-senior think tank said last month it expected the COLA adjustment to be 3.1% next year.
Read: Social Security’s COLA could be 3.1% in 2024, and buying power has dropped 36% since 2000
“New consumer price data indicates that inflation is at its lowest level since March 2021. That was the start of our recent 40-year storm of two back-to-back years of historically high consumer prices,” said the Senior Citizens League’s Social Security and Medicare policy analyst Mary Johnson.
Consumer prices rose only 0.1% in May, kept in check by cheaper oil. Inflation more broadly showed little sign of rapid deceleration, however. The yearly rate of inflation slowed to 4% from 4.9%, marking the lowest level since March 2021.
Read: Inflation slows again, CPI shows, and might keep Fed on sidelines
Meanwhile, the so-called core rate of inflation that omits food and energy rose a stiffer 0.4% — in line with the Wall Street forecast.
The Federal Reserve views the core rate as a better predictor of inflation trends. The increase in the core rate over the past 12 months slipped to 5.3% from 5.5%, also the smallest gain since the fall of 2021.
According to an ongoing survey by the Senior Citizens League, older consumers are reporting little improvement in their household spending yet.
“While the rate of inflation has slowed, prices have remained high in certain essential categories of spending. Sixty-two percent of survey participants report food costs as their fastest-growing cost. Housing costs are the biggest concern of 22% of survey respondents,” Johnson said.
Since January of this year, the actual inflation rate, as measured by the CPI-W, was lower than the amount older Americans received in their 8.7% COLA. That difference theoretically should provide a modest temporary improvement in buying power of roughly $52 per month for a retiree with average benefits of $1,694.00. Inflation, however, was so severe in 2021 and 2022 that the average Social Security benefit fell behind by $1,054, leaving 53% of retirees doubting they will recover because household costs rose more than the dollar amount of their COLAs, Johnson said.
This post was originally published on Market Watch
