January 1995 Consumer Price Index

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent before seasonal adjustment in January to a level of 150.3 (1982-84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in January, the CPI-U increased 2.8 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.4 percent in January, prior to seasonal adjustment. The January 1995 CPI-W level of 147.8 was 2.9 percent higher than the index in January 1994.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.3 percent in January, following increases of 0.1 and 0.2 percent in the 2 preceding months. In January, the index for food declined 0.3 percent, following an advance of 0.8 percent in December. Energy costs, which declined slightly in December, increased 0.3 percent in January. Excluding food and energy, the CPI-U increased 0.4 percent, following a 0.1 percent rise in December. The acceleration in January reflects a larger rise in shelter costs and upturns in the indexes for apparel commodities, airline fares, and housefurnishings, each of which had declined throughout most of the second half of 1994.

The food and beverage index fell 0.2 percent in January. Grocery store food prices decreased 0.5 percent in January, following a 1.0 percent increase in December. The deceleration reflects a sharp downturn in the index for fruits and vegetables, which declined 2.6 percent in January, following a 5.3 percent rise in December. The index for fresh fruits and vegetables decreased 4.3 percent, more than offsetting a 1.0 percent increase in the index for processed fruits and vegetables. Each of the other major grocery store food groups showed little movement in January, with the changes ranging between negative and positive 0.2 percent. The index for cereal and bakery products fell 0.2 percent, while the indexes for meats, poultry, fish, and eggs, for dairy products, and for other food at home each increased. The index for meats, poultry, fish, and eggs turned up in January as an increase in meat prices more than offset declines in the indexes for poultry, eggs, and fish and seafood. Beef and pork prices, each of which declined in 1994, rose 0.5 and 1.3 percent, respectively. The other two components of the food and beverage index--restaurant meals and alcoholic beverages--each rose 0.1 percent in January.

The housing component increased 0.4 percent in January, following no change in December. Each of the three major housing groups contributed to the acceleration. Shelter costs, which increased 0.1 percent in December, advanced 0.3 percent in January. Within shelter, renters' costs rose 0.2 percent; homeowners' costs, 0.4 percent; and maintenance and repair costs, 0.3 percent. The index for fuel and other utilities, which declined 0.2 percent in December, increased 0.5 percent in January. The index for household fuels rose 0.2 percent, as increases in the indexes for fuel oil and electricity--up 0.6 and 0.7 percent, respectively--more than offset an 0.8 percent decline in the index for natural gas. The index for other utilities and public services rose 1.0 percent in January, reflecting a sharp increase in the index for telephone services. These charges rose 1.3 percent in January as a 2.7 percent increase in local telephone call charges more than offset a 4.8 percent drop in charges for intrastate toll calls. Charges for cable television, which had declined throughout most of 1994 before turning up in November, rose 0.7 percent in January. The index for household furnishings and operation, which was unchanged in December, increased 0.8 percent in January, its largest monthly advance since February 1991. Contributing to the January increase was a 10.3 percent rise in postage fees.

The transportation index advanced 0.6 percent in January, following an increase of 0.2 percent in December. Public transportation costs, which declined 2.3 percent in December, rose 1.2 percent in January, reflecting an upturn in airline fares. The index for airline fares rose 2.2 percent in January, following declines in each of the last four months of 1994 totaling 10.8 percent. Private transportation costs rose 0.5 percent in January, the same as in December. The index for motor fuels rose 0.4 percent in January. (Prior to seasonal adjustment, gasoline prices declined 1.8 percent. See the note on page 6, which explains the quality adjustment made to gasoline prices in the January CPI.) The increase of 0.1 percent in the index for new cars continues its pattern of very little movement evident since the introduction of the 1995 models. (As of January, the proportion of 1995 models in the index was about 80 percent of the new car sample.) Automobile finance charges continued to increase sharply, advancing 4.0 percent in January and 27.4 percent in the last 12 months. Used car prices also continued to rise sharply, advancing 2.6 percent in January and 11.4 percent since January 1994.

The index for apparel and upkeep, which registered declines throughout most of the second half of 1994, turned up in January, increasing 0.7 percent. Smaller than usual discounts on fall-winter clothing in January, resulting from substantial discounting earlier in the season were responsible for the January increase. (Prior to seasonal adjustment, clothing prices fell 0.9 percent in January.)

Medical care costs rose 0.3 percent in January to a level 4.9 percent higher than a year earlier. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--was unchanged in January. The index for medical care services rose 0.4 percent in January. Charges for professional services and hospital and related services increased 0.3 and 0.2 percent, respectively.

Entertainment costs increased 0.4 percent in January, following a 0.1 percent rise in December. The indexes for toys and sporting goods and equipment and for fees for club memberships and for instructions, which declined in December, turned up in January.

The index for other goods and services was unchanged in January. The index for tobacco and smoking products fell 1.3 percent. (Prior to seasonal adjustment, tobacco prices rose 0.1 percent.) An increase in the index for personal and educational expenses, in particular, for prices of school books and supplies offset the drop in the tobacco index.

CPI for Urban Wage Earners and Clerical Workers (CPI-W)

On a seasonally adjusted basis, the CPI for Urban Wage Earners and Clerical Workers also rose 0.3 percent in January.

QUALITY ADJUSTMENT FOR GASOLINE

A quality adjustment has been made to gasoline prices used in the January CPI to account for the effects of the mandated introduction of reformulated gasoline in selected areas of the United States. The gasoline index rose 0.4 percent in January, following seasonal adjustment. Without the quality adjustment, it is estimated that this index would have increased 1.1 percent. In those areas required to sell the reformulated gasoline, virtually all of the January price quotes were for reformulated gasoline.

CPI ANNOUNCEMENT

Effective with the release of data for January 1995, on February 15, the Bureau of Labor Statistics introduced several technical improvements in the calculation of the Consumer Price Index designed to make the index a more accurate measure of price change. These improvements, which stem from findings of research conducted by BLS staff, affected the food at home, shelter, and prescription drug components of the CPI.

The change to the food at home component improved the outlet sample rotation process. (Approximately 20 percent of CPI outlet samples are updated annually.) Empirical evidence had established that the prior procedures for the routine introduction of new samples tended to overstate price change for the newly sampled items immediately following their introduction. Since the food at home component of the index is particularly sensitive to this effect, new measures designed to lessen its impact have been introduced in the calculation of the food at home component beginning with January 1995 data.

In addition, two changes have been made in the way in which the shelter component of the CPI is calculated. First, the imputation formula for estimating owners' equivalent rent, which relies upon a matching of a sample of residential rental units to a sample of homeowner units, has been improved. Second, additional BLS research indicated that the prior procedures, both for residential rent and for owners' implicit rent, tended to understate the short-term rent change. Beginning with data for January 1995, BLS has incorporated an improved estimate. Research on this issue will continue during the course of the upcoming CPI revision, and, if this research yields further improvements in the estimates of rent changes, they will be incorporated into the index as part of the revision effort.

Finally, the procedure for handling the introduction into the index of generic versions of formerly patented drugs into the index has been changed. The prior practice of directly comparing the prices of patented and generic drugs only when the patented drug is no longer available in the sampled outlet has been changed. A new procedure, which reflects the rate at which consumers switch their purchases from patented to generic versions of a drug, has been employed beginning with CPI data for January 1995.

The basic research papers on these topics are available from the BLS by calling 202-606-7000. These changes are explained more fully in the CPI Detailed Report for October 1994.