Trustees compare current-year third quarter (July, August, and September) CPI-W readings with the last COLA adjustment to determine increases in benefits.

The CPI-W rose 0.3 percent in August, according to numbers released by the Labor Department today, showing a 1.9 percent increase in inflation over the past 12 months.

In July, the reading showed a decrease in inflation of 0.1 percent and a 12-month increase in inflation of 1.6 percent.

To be clear, the numbers for September, the final third-quarter month, will be needed to know for sure what the 2018 COLA increase will be. That number will be released on October 13.

But economists and Social Security experts told BenefitsPRO that inflation in September is unlikely to be substantial enough to raise the COLA to the SSA’s 2.2 percent median projection.

The disasters in Texas and Florida from hurricanes Harvey and Irma also present a wildcard on potential inflation readings.

The Labor Department said Harvey had a small impact on August inflation.

While the storms’ impact on gas prices, included in the CPI-W reading, may not register until September’s reading, it is not expected to be enough to move next year’s COLA to 2.2 percent.

“I don’t expect the severe weather to lessen the cost of goods and services in September,” said Peter Weinbaum, a Social Security consultant who advises individuals.

“On the other hand, it would take a huge increase in September to move the three-month average a lot higher, and some of the costs associated with the hurricanes may not find their way into the CPI-W until sometime in the fourth quarter,” added Weinbaum, who blogs at socialsecuritymaven.com.

Last year’s COLA increase of 0.3 percent will be deducted from this year’s third quarter CPI-W. Using only July’s number, Weinbaum says the next year’s COLA increase would only be 1.5 percent.

Gas prices spike in Hurricanes’ aftermath

Hurricane Harvey shuttered one-third of U.S. refining capacity in the week following the storm.

Gas prices across much of the country quickly spiked. According to the Lundberg Survey, the average price of gas rose 30 cents by September 8 to $2.69 per gallon. That’s a 48-cent increase over a year ago, according to reporting by the Associated Press.

The CPI-W measures inflation on food, energy costs, housing, clothes, medical, and transportation costs.

In August, increased costs of housing and gas accounted for the overall inflation, according to the Labor Department.

Because the agency said Harvey had limited impact on August’s reading, the spike in gas prices is likely to register in September’s reading.

The question is whether that will be enough to push inflation higher to meet SSA’s 2.2 percent COLA projection.

“It's possible, but I kind of doubt it's enough to make a real difference,” said Andrew Biggs, a resident scholar at the American Enterprise Institute and a former deputy commissioner at the SSA.

Ultimately, the fallout from Hurricanes Harvey and Irma is likely to put some upward pressure on inflation, but not in time to impact the third-quarter number used to set COLAs, says Adam Kamins, a senior economist at Moody’s Analytics.

“The storms will likely put some upward pressure on inflation, but I don’t think it will push the number to 2.2 percent,” said Kamins. “Inflation has been low for a while because wage and productivity have been weak. The storms won’t be enough to offset that.”

Gas prices may indeed stay higher, said Kamins. Moreover, the destruction in Texas and Florida will require massive rebuilding initiatives. That can be expected to increase the demand for labor in those states, potentially putting upward pressure on construction wages.

“There was already a shortage of construction workers in each of those fast-growing states. Now there will be more pressure on labor demand with the shortage of supply of workers,” said Kamins.

Insurance premiums can be expected to rise for all consumers after Harvey and Irma. But in each case, Kamins thinks the impact of the storms on inflation will lag into next year, not in time to materially affect the COLA adjustments for 2018.