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The CPI-W for August 2012 was released this morning by the Bureau of Labor Statistics, and, as we predicted in our last post, the index increased considerably from last month, moving up from 225.568 to 227.056. The average of the July and August CPI-Ws is 226.312 which is 1.4% higher than the third quarter 2011 average (the baseline for COLA calculations). The September index, which will be released on October 16, is the last piece to the COLA puzzle. If the September number exceeds 226.312, the COLA will be greater than 1.4, if it is less than 226.312, the COLA will be less than 1.4. It is all but certain that SS recipients will receive a COLA this year.

Let’s look at a few scenarios:

• If the increase in CPI-W is wiped out, and the index returns to its July value for September, the COLA will be just under 1.3%.
• If the CPI-W is unchanged between August and September, the COLA will be about 1.5%
• If the CPI-W increases at the same rate as it did between July and August, the COLA will be about 1.7%

I think it’s likely that the COLA will be somewhere in the range of 1.4 to 1.6 percent next year. The CPI-W increased at a very high rate in August, and I don’t expect the change in September to be as great. The biggest driver in the August increase was energy prices, so they will likely dictate the final COLA. Check back on October 16 for a look at the September numbers!