Wall Street’s attention will return to inflation as three inflation reports from the Federal Reserve and federal government for September are released: U.S. Inflation Consumer Expectations and Consumer Price Indexes (NYSE :)), and Producer Price Indexes (PPI).

Investors and traders have been closely following inflation data in recent months to see if the U.S. economic villain is back. This has forced the Federal Reserve’s accommodative policy to be reversed.

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ICE Inflation Measure

ICE is the Federal Reserve’s most favorable inflation measure, as it tries to determine whether inflation is transitory or permanent.

ICE is a term that measures future inflation based on consumers’ inflation expectations over the coming year. Modern economic theory predicts that inflation will accelerate in 2019, while rising expectations and falling expectations mean inflation will decrease. When making decisions such as negotiating employment contracts and lending money, both households and businesses take into account the anticipated inflation.

In August, ICI was up 5.2%. It was the 10th consecutive gain, thanks to gains in food prices, rent and medical costs. The expected cost of college education fell partially to offset these gains.

Markets expect ICI to rise slightly to 5.3% in September.

CPI Inflation Measure

CPI is a measure of consumer inflation at retail. CPI grew at a rate of 5.3% annually in August. This was slightly higher than the 5.4% recorded in July and June. It also represented the lowest gain in seven years, due to the moderated price increases for used cars and trucks as well as steady price rises for shelter and clothing, and a decline in airfares.

CPI is expected to stay at 5.3% for September according to the markets.

Measuring PPI Inflation

PPI is the current inflation measured at the producer or wholesale level. This is where supply chain bottlenecks and pricing issues enter into the equation.

PPI rose at 8.3% annually in August. This is the highest level since November 2010. That’s thanks to a rise in the index for final demand; prices for final demand services rose 0.7%. The same goes for the index of final demand goods, which increased by 1.0%.

The market expects that PPI in September will edge up to 8.5%.

The Bottom Line

The PPI is the index that measures the effect of supply chain bottlenecks and commodity prices on inflation. In other words, all three measures are expected to continue to raise inflation. There could be unexpected outcomes.

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