Consumer Price Index Summary
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CONSUMER PRICE INDEX: AUGUST 2000
The Consumer Price Index for All Urban Consumers (CPI-U) increased
0.1 percent in August, before seasonal adjustment, to a level of 172.7
(1982-84=100), the Bureau of Labor Statistics of the U.S. Department of
Labor reported today. For the 12-month period ended in August, the CPI-U
increased 3.4 percent.
The Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) declined 0.1 percent in August, prior to seasonal adjustment. The
August level of 169.2 was 3.3 percent higher than the index in August
1999.
CPI for All Urban Consumers (CPI-U)
On a seasonally adjusted basis, the CPI-U declined 0.1 percent in
August after increasing 0.2 percent in July. The energy index, which rose
0.1 percent in July, fell 2.9 percent in August. The indexes for
petroleum-based energy and for energy services declined 5.5 and 0.2
percent, respectively. The food index rose 0.2 percent in August. The
index for food at home increased 0.3 percent after advancing 0.7 percent
in July, with each of the major food at home groups except fruits and
vegetables contributing to the deceleration. Excluding food and energy,
the CPI-U rose 0.2 percent in August, the same as in each of the previous
four months.
Table A. Percent changes in CPI for All Urban Consumers (CPI-U)
Seasonally adjusted Un-
Compound adjusted
Expenditure Changes from preceding month annual rate 12-mos.
Category 2000 3-mos. ended ended
Feb. Mar. Apr. May June July Aug. Aug. '00 Aug. '00
All Items .5 .7 .0 .1 .6 .2 -.1 3.1 3.4
Food and beverages .4 .1 .1 .5 .1 .5 .2 3.6 2.7
Housing .5 .4 .1 .2 .5 .4 .2 4.4 3.5
Apparel .2 .3 -.5 -.2 -.6 -1.0 .2 -5.7 -1.7
Transportation 1.3 2.5 -.7 -.5 1.8 -.3 -1.1 1.8 5.1
Medical care .4 .5 .3 .3 .4 .3 .4 4.7 4.2
Recreation .0 .4 .0 .3 .3 .3 .1 2.7 1.7
Education and
communication -.5 .0 .0 .1 -.1 .6 .2 2.8 1.6
Other goods and
services .8 .5 1.4 -.6 -.2 1.0 -.3 2.1 5.4
Special Indexes
Energy 4.6 4.9 -1.9 -1.9 5.6 .1 -2.9 10.7 13.1
Food .4 .1 .1 .5 .1 .5 .2 3.4 2.7
All Items less
food and energy .2 .4 .2 .2 .2 .2 .2 2.5 2.5
See page 4 for a note on the use of hedonic models to adjust prices of
selected products in the CPI for changes in quality.
During the first eight months of 2000, the CPI-U rose at a 3.4
percent seasonally adjusted annual rate (SAAR). This compares with an
increase of 2.7 percent for all of 1999. Energy costs have increased at a
14.3 percent annual rate in the first eight months of 2000 after advancing
13.4 percent in all of 1999. Food costs, which rose 1.9 percent in 1999,
have risen at a 2.8 percent SAAR thus far this year. Excluding food and
energy, the CPI-U has advanced at a 2.6 percent rate compared with a 1.9
percent rise for all of 1999.
The food and beverages index increased 0.2 percent in August. The
index for food at home, which rose 0.7 percent in July, increased 0.3
percent in August. Each of the major food at home groups except fruits
and vegetables contributed to the deceleration in August. The index for
fruits and vegetables rose 1.2 percent in August, following a 1.0 percent
rise in July. Over the past 12 months, however, fruit and vegetable
prices have risen only 0.2 percent. In August, within the fruits and
vegetables group, the indexes for fresh fruits and fresh vegetables rose
0.5 and 2.3 percent, respectively. The index for processed fruits and
vegetables rose 0.5 percent. Among the other major food at home groups,
the indexes for cereal and bakery products and for dairy products each
increased 0.3 percent. The index for meats, poultry, fish, and eggs rose
0.2 percent in August. Meat prices continue to advance; the indexes for
beef and for pork rose 0.5 and 0.8 percent, respectively, in August and
are up 8.4 and 9.8 percent in the past 12 months. Poultry prices turned
down in August, declining 0.3 percent, and have risen only 1.8 percent
since August 1999. The index for other food at home rose 0.1 percent in
August, while the index for nonalcoholic beverages declined 0.3 percent.
The other two components of the food and beverages index--food away from
home and alcoholic beverages--each increased 0.2 percent in August.
The index for housing increased 0.2 percent in August, following a
0.4 percent rise in July. The index for fuels and utilities, which rose
sharply in both June and July, turned down in August. Each of the three
principal household fuels failed to advance in August. The index for fuel
oil decreased 0.1 percent in August, following a 20.5 percent rise over
the past seven months. The index for natural gas, which rose 20.1 percent
in the first seven months of 2000, declined 0.7 percent in August. The
index for electricity was unchanged in August after increasing 1.9 percent
in the first seven months of the year. (Prior to seasonal adjustment,
charges for electricity fell 0.4 percent in August after increasing 9.4
percent in the first seven months of 2000.) Shelter costs, which rose
0.2 percent in July, increased 0.3 percent in August. Within shelter, the
indexes for rent and for owners' equivalent rent each rose 0.3 percent,
while the index for lodging away from home was unchanged. The index for
household furnishings and operations, which advanced 0.5 percent in July,
rose 0.1 percent in August.
The transportation component declined for the second consecutive
month, down 1.1 percent in August. The index for gasoline fell 6.0
percent, following a 2.0 percent decrease in July. Despite the recent
declines, gasoline prices have advanced 11.2 percent since December after
advancing 30.1 percent in all of 1999. The index for new vehicles, which
rose 0.2 percent in July, declined 0.2 percent in August. The index for
used cars and trucks fell 0.1 percent. Public transportation costs
increased 0.9 percent, largely as a result of a 1.5 percent rise in
airline fares. Airline fares have risen 11.3 percent thus far in 2000.
The index for apparel rose 0.2 percent in August, its first monthly
increase since March. Price increases associated with the introduction of
fall-winter wear more than offset price declines on spring-summer
clothing.
Medical care costs rose 0.4 percent in August to a level 4.2 percent
higher than a year ago. In August, the index for medical care commodities-
-prescription and nonprescription drugs and medical supplies--rose 0.3
percent. The index for medical care services rose 0.4 percent. Charges
for professional services and for hospital and related services increased
0.4 and 0.8 percent, respectively.
The index for recreation costs increased 0.1 percent in August,
following increases of 0.3 percent in each of the preceding three months.
Smaller increases in the indexes for admissions to movies, theaters,
concerts, and sporting events and for club membership dues and fees for
participant sports were largely responsible for the moderation.
The index for education and communication rose 0.2 percent in August,
following a 0.6 percent rise in July. Educational costs declined 0.2
percent, partially offsetting a 0.4 percent increase in the index for
communication. The index for tuition, other school fees, and child care
declined 0.2 percent. (Prior to seasonal adjustment, this index rose 1.2
percent.) Within the index for communication, the index for telephone
services rose 0.7 percent, as a 2.0 percent rise in local charges more
than offset a 0.7 percent decrease in long distance charges.
The index for other goods and services decreased 0.3 percent in
August, following a 1.0 percent rise in July. Cigarette prices, which
rose 3.2 percent in July, declined 1.7 percent.
CPI for Urban Wage Earners and Clerical Workers (CPI-W)
On a seasonally adjusted basis, the CPI for Urban Wage Earners and
Clerical Workers declined 0.1 percent in August.
Table B. Percent changes in CPI for Urban Wage Earners and Clerical
Workers (CPI-W)
Seasonally adjusted Un-
Compound adjusted
Expenditure Changes from preceding month annual rate 12-mos.
Category 2000 3-mos. ended ended
Feb. Mar. Apr. May June July Aug. Aug. '00 Aug. '00
All Items .5 .7 .0 .1 .6 .2 -.1 2.6 3.3
Food and beverages .4 .2 .1 .5 .1 .5 .2 3.4 2.9
Housing .6 .2 .2 .2 .5 .5 .1 4.2 3.3
Apparel .1 .2 -.5 -.2 -.5 -1.2 .1 -6.1 -1.9
Transportation 1.3 2.6 -.8 -.5 2.0 -.5 -1.3 1.1 5.0
Medical care .4 .5 .4 .3 .4 .3 .4 4.7 4.3
Recreation -.1 .4 .0 .4 .3 .1 .1 2.0 1.4
Education and
communication -.5 -.1 .0 .2 -.3 .6 .2 2.0 1.5
Other goods and
services .9 .6 1.8 -1.0 -.3 1.2 -.4 2.0 6.2
Special Indexes
Energy 4.5 5.5 -2.4 -1.9 6.2 -.5 -3.4 8.9 13.1
Food .4 .2 .1 .5 .1 .5 .2 3.2 2.8
All Items less
food and energy .2 .3 .2 .2 .1 .2 .1 1.8 2.4
Consumer Price Index data for September are scheduled for release on
Wednesday, October 18, 2000, at 8:30 A.M. (EDT).
__________________________________________________________________________
Extending the use of hedonic models to
adjust prices for changes in quality
The Bureau of Labor Statistics (BLS) is continuing to expand the use in
the Consumer Price Index (CPI) of quality adjustments derived from hedonic
models. As first announced at the time of the July 2000 CPI release,
effective with the CPI for October 2000, BLS will extend hedonic quality
adjustment to Washing machines and Clothes dryers. These items are both
part of the Major appliances stratum.
A hedonic model decomposes the price of a consumer product into
implicit prices for each of its important features and components, thereby
providing an estimate of the value of each feature and component. BLS
plans to extend this method to additional items in the CPI. As BLS does
so, it will give CPI users notice at least three months before the first
use of hedonic quality adjustment for each additional item and will have
detailed papers on the models to be employed available by the time of
first use.
The relative importance (share of weight), as of December 1999, of the
Major appliances stratum was 0.205 percent in the CPI for all Urban
Consumers (CPI-U) and 0.236 percent in the CPI for Urban Wage Earners and
Clerical Workers (CPI-W). Within Major appliances, Washing machines are
estimated to represent 18 percent of the weight and Clothes dryers about
13 percent.
The hedonic models that BLS analysts developed for Washing machines and
Clothes dryers use observations collected for the CPI, supplemented with
additional observations that the BLS collected specifically for this
purpose. Papers describing this work are in preparation and will be
available before release of the October 2000 CPI.
Additional work on hedonic quality adjustment is underway at BLS.
For more information on these changes, write to
Bureau of Labor Statistics
Division of Consumer Prices and Price Indexes
2 Massachusetts Ave. NE, Room 3260
Washington, DC 20212
or contact Paul Liegey either by telephone at (202) 691-5394 or by
electronic mail at Liegey_P@bls.gov.
__________________________________________________________________________
Facilities for Sensory Impaired
Information from this release will be made available to
sensory impaired individuals upon request. Voice phone:
202-691-5200, Federal Relay Services: 1-800-877-8339. For
a recorded message of Summary CPI data, call (202) 691-5200.
__________________________________________________________________________
Brief Explanation of the CPI
The Consumer Price Index (CPI) is a measure of the
average change in prices over time in a market basket of
goods and services. The Bureau of Labor Statistics
publishes CPIs for two population groups: (1) a CPI for All
Urban Consumers (CPI-U) which covers approximately 87
percent of the total population and (2) a CPI for Urban Wage
Earners and Clerical Workers (CPI-W) which covers 32 percent
of the total population. The CPI-U includes, in addition to
wage earners and clerical workers, groups such as
professional, managerial, and technical workers, the self-
employed, short-term workers, the unemployed, and retirees
and others not in the labor force.
The CPI is based on prices of food, clothing, shelter,
and fuels, transportation fares, charges for doctors' and
dentists' services, drugs, and other goods and services that
people buy for day-to-day living. Prices are collected in
87 urban areas across the country from about 50,000 housing
units and approximately 23,000 retail establishments-
department stores, supermarkets, hospitals, filling
stations, and other types of stores and service
establishments. All taxes directly associated with the
purchase and use of items are included in the index. Prices
of fuels and a few other items are obtained every month in
all 87 locations. Prices of most other commodities and
services are collected every month in the three largest
geographic areas and every other month in other areas.
Prices of most goods and services are obtained by personal
visits or telephone calls of the Bureau's trained
representatives.
In calculating the index, price changes for the various
items in each location are averaged together with weights
which represent their importance in the spending of the
appropriate population group. Local data are then combined
to obtain a U.S. city average. Separate indexes are also
published by size of city, by region of the country, for
cross-classifications of regions and population-size
classes, and for 26 local areas. Area indexes do not
measure differences in the level of prices among cities,
they only measure the average change in prices for each area
since the base period.
The index measures price change from a designed
reference date-1982-84 which equals 100.0. An increase of
16.5 percent, for example, is shown as 116.5. This change
can also be expressed in dollars as follows: the price of a
base period market basket of goods and services in the CPI
has risen from $10 in 1982-84 to $11.65.
For further details visit the CPI home page on the
Internet at http://stats.bls.gov/cpihome.htm or contact our
CPI Information and Analysis Section on (202) 691-7000.
__________________________________________________________________________
Calculating Index Changes
Movements of the indexes from one month to another are
usually expressed as percent changes rather than changes in index
points, because index point changes are affected by the level of
the index in relation to its base period while percent changes are
not. The example below illustrates the computation of index point
and percent changes.
Percent changes for 3-month and 6-month periods are expressed
as annual rates and are computed according to the standard formula
for compound growth rates. These data indicate what the percent
change would be if the current rate were maintained for a 12-month
period.
Index Point Change
CPI 115.7
Less previous index 111.2
Equals index point change 4.5
Percent Change
Index point difference 4.5
Divided by the previous index 111.2
Equals 0.040
Results multiplied by one hundred 0.040x100
Equals percent change 4.0
_________________________________________________________________________
A Note on Seasonally Adjusted and Unadjusted Data
Because price data are used for different purposes by
different groups, the Bureau of Labor Statistics publishes
seasonally adjusted as well as unadjusted changes each
month.
For analyzing general price trends in the economy,
seasonally adjusted changes are usually preferred since they
eliminate the effect of changes that normally occur at the
same time and in about the same magnitude every year--such
as price movements resulting from changing climatic
conditions, production cycles, model changeovers, holidays,
and sales.
The unadjusted data are of primary interest to
consumers concerned about the prices they actually pay.
Unadjusted data also are used extensively for escalation
purposes. Many collective bargaining contract agreements
and pension plans, for example, tie compensation changes to
the Consumer Price Index unadjusted for seasonal variation.
Seasonal factors used in computing the seasonally
adjusted indexes are derived by the X-12-ARIMA Seasonal
Adjustment Method. The updated seasonal data at the end of
1977 replaced data from 1967 through 1977. Subsequent
annual updates have replaced 5 years of seasonal data, e.g.,
data from 1995 through 1999 were replaced at the end of
1999. The seasonal movement of all items and 54 other
aggregations is derived by combining the seasonal movement
of 73 selected components. Each year the seasonal status of
every series is reevaluated based upon certain statistical
criteria. If any of the 73 components change their seasonal
adjustment status from seasonally adjusted to not seasonally
adjusted, not seasonally adjusted data will be used for the
last 5 years, but the seasonally adjusted indexes will be
used before that period.
Seasonally adjusted data, including the All items index
levels, are subject to revision for up to five years after
their original release. For this reason, BLS advises
against the use of these data in escalation agreements.
Effective with the calculation of the seasonal factors
for 1990, the Bureau of Labor Statistics has used an
enhanced seasonal adjustment procedure called Intervention
Analysis Seasonal Adjustment for some CPI series.
Intervention Analysis Seasonal Adjustment allows for better
estimates of seasonally adjusted data. Extreme values
and/or sharp movements which might distort the seasonal
pattern are estimated and removed from the data prior to
calculation of seasonal factors. Beginning with the
calculation of seasonal factors for 1996, X-12-ARIMA
software was used for Intervention Analysis Seasonal
Adjustment.
For the fuel oil and the motor fuels indexes, this
procedure was used to offset the effects that extreme price
volatility would otherwise have had on the estimates of
seasonally adjusted data for those series. For the
breakfast cereal index, the procedure was used to offset the
effects of price-cutting among cereal manufacturers. For
the educational books and supplies index, the procedure was
used to account for greater than normal sale prices on
educational reference books. For some alcoholic beverage
series, Intervention Analysis Seasonal Adjustment was used
to offset the effects of increased brewer's costs along with
increased demand for specialty beers. For the nonalcoholic
beverages index, the procedure was used to offset the
effects of a large increase in coffee prices due to adverse
weather. For the fats and oils series, the procedure was
used to account for lower domestic butter stocks, lower cold
storage supplies, and anticipation of a bumper soybean crop.
For the new trucks index, the procedure was applied to
account for loyalty rebates offered to customers by American
automakers. For the water and sewerage maintenance index,
the procedure was used to account for a data collection anomaly.
A description of Intervention Analysis Seasonal
Adjustment, as well as a list of unusual events modeled and
seasonal factors for these items may be obtained by writing
the Bureau of Labor Statistics, Division of Consumer Prices
and Price Indexes, Washington, DC 20212 or by calling Claire
McAnaw Gallagher on (202) 691-6968 or sending e-mail to
Gallagher_C@BLS.GOV.
Bureau of Labor Statistics
mailto:gibson_s@bls.gov
Last modified:
Friday, September 15, 2000
URL: /news.release/cpi.nr0.htm
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Consumer Price Index