The Bureau of Labor Statistics reported July 14 that inflation cooled sharply in June, and the data has already changed how analysts are forecasting Social Security’s 2027 cost-of-living adjustment. But the June report isn’t one of the three that will determine the official COLA. Mary Johnson, an independent Social Security and Medicare policy analyst who has forecast the annual COLA for decades, lowered her 2027 estimate to 3.7% after the report, down from 4.7% last month. The Senior Citizens League kept its forecast at 3.8%.
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The Senior Citizens League estimates a 3.8% COLA would add about $74 a month to the average benefit. But that dollar estimate depends on a COLA projection that could still move. Neither number is an official benefit increase. The Social Security Administration will not announce the 2027 COLA until October, after inflation data for July, August and September is available.
What Drove Johnson’s Lower COLA Forecast
Social Security calculates the COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a narrower measure than the overall inflation figure. That index fell 0.5% in June before seasonal adjustment, and Johnson lowered her forecast after it. The broader Consumer Price Index for All Urban Consumers (CPI-U), the headline figure most people see, fell 0.4% in June, the largest monthly decline since April 2020. Falling energy did most of the work, with energy down 5.7%, including a 9.7% drop in gasoline.
“This is a significant drop in inflation, and one that we’ve rarely seen in the June CPI data over the past five years,” Johnson said in a statement.
But a drop in inflation does not mean everything got cheaper. Food prices rose 0.2% in June, while shelter costs increased 0.1%.
“Consumers looking for prices to go down may not feel that has happened yet,” Johnson said in the same statement, pointing to uncertainty around oil prices and whether June’s drop will last.
The Deciding Data Starts Arriving Aug. 12
The official COLA is based on the average CPI-W readings for July, August and September, not June. The first of those, the July report, comes out Aug. 12, with August and September to follow. Until then, the estimates are built on data that doesn’t count toward the final number.
Gas prices remain a major wild card. They drove June’s drop, but Johnson cautioned that the improvement may not last, citing renewed U.S.-Iran tensions around the Strait of Hormuz that are affecting oil prices. If gas climbs again during the third quarter, CPI-W and the COLA estimates could rise with it.