July 1996 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) increased 0.2 percent before seasonal adjustment in July to a level of 157.0 (1982- 84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in July, the CPI-U increased 3.0 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 0.1 percent in July, prior to seasonal adjustment. The July 1996 CPI-W level of 154.3 was 2.9 percent higher than the index in July 1995.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.3 percent in July, following a 0.1 percent increase in June. The energy index, which turned down in June after increasing 9.4 percent in the preceding 6-month period, declined 0.4 percent in July. The index for petroleum-based energy declined 2.0 percent in July, while the index for energy services rose 1.1 percent. The food index rose 0.5 percent in July, reflecting, in part, another sharp increase in prices for dairy products. Excluding food and energy, the CPI-U rose 0.3 percent, following a 0.2 percent increase in June. The slightly larger advance in July was due to a jump in shelter costs, which partially resulted from a 2.3 percent rise in the cost of lodging while out of town.

See page 4 for a note on the implementation of improvements in CPI item substitution procedures and the announcement of a change in the hospital and related service component of the CPI.

During the first 7 months of 1996, consumer prices rose at a 3.5 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.5 percent for all of 1995. Increases in the food and energy components, which acted as moderating influences on overall consumer price movements throughout most of the past 5 years, have been responsible for the acceleration thus far in 1996. Energy costs, which declined last year, have increased at a 9.6 percent rate, with petroleum- based energy advancing at a 15.7 SAAR. The food index has risen at a 4.1 percent annual rate in the first 7 months after increasing 2.1 percent in all of 1995. Excluding food and energy, the CPI-U advanced at a 3.0 percent rate in the first 7 months of 1996, the same rate as the increase for all of 1995.

The food and beverage index rose 0.5 percent in July. The index for grocery store foods, which increased 1.0 percent in June, advanced 0.5 percent in July. The index for dairy products increased 1.5 percent, the same as in June. The indexes for fruits and vegetables and for meats, poultry, fish, and eggs, which increased 2.0 and 1.5 percent, respectively, in June, each decelerated in July, advancing 0.5 and 0.6 percent, respectively. In the former group, the index for fresh fruit prices fell 1.3 percent, while the indexes for fresh vegetables and for processed fruits and vegetables increased 2.1 and 1.3 percent, respectively. Within the index for meats, poultry, fish, and eggs, price increases for beef, pork, and poultry each slowed in July, advancing 0.8, 0.3, and 0.9 percent, respectively. The other two major grocery store food indexes--cereal and bakery products and other food at home--each rose 0.2 percent in July. The other two components of the food and beverage index--restaurant meals and alcoholic beverages-- increased 0.3 and 0.1 percent, respectively, in July.

The housing component rose 0.4 percent in July after advancing 0.1 percent in June, reflecting a jump in shelter costs and an upturn in the index for fuel and other utilities. Shelter costs advanced 0.5 percent in July, following increases of 0.2 percent in each of the 5 preceding months. Within shelter, renters' costs rose 0.8 percent, homeowners' costs rose 0.3 percent, and maintenance and repair costs increased 0.4 percent. The rise in renters' costs reflects a 2.3 percent increase in the index for lodging while out of town; residential rents rose 0.3 percent. The index for fuel and other utilities, which declined 0.2 percent in June, increased 0.5 percent in July. The index for household fuels increased 0.9 percent in July, while the index for other utilities and public services fell 0.1 percent. Among household fuels, the index for electricity increased 1.5 percent after declining 1.1 percent in June. The index for natural gas rose 0.4 percent, while the index for fuel oil fell 2.0 percent. The index for household furnishings and operation rose 0.1 percent in July, the same as in June.

The transportation index declined for the second consecutive month- -down 0.2 percent in July--primarily as a result of a second consecutive decrease in the index for motor fuels. The index for gasoline, which increased 18.2 percent in the period from November 1995 through May 1996, prior to a 3.2 percent drop in June, fell 2.7 percent in July. As of July, the gasoline index was 9.9 percent below its peak level of December 1990. The indexes for new car prices and for automobile finance charges increased 0.2 and 0.9 percent, respectively. (Prior to seasonal adjustment, new car prices fell 0.2 percent.) The index for used cars declined for the fourth consecutive month--down 0.1 percent. Public transportation costs declined 0.5 percent, largely as a result of a 1.3 percent decrease in airline fares.

The index for apparel and upkeep, which declined 0.4 percent in June, decreased 0.1 percent in July. (Prior to seasonal adjustment, clothing prices fell 2.1 percent, reflecting large seasonal price declines for spring and summer wear.)

Medical care costs rose 0.3 percent in July to a level 3.6 percent above a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--was unchanged in July. The index for medical care services rose 0.3 percent in July. Charges for professional services and hospital and related services increased 0.4 and 0.2 percent, respectively.

Entertainment costs increased 0.1 percent in July. Increases in the indexes for fees for participant sports and for club memberships--up 1.3 and 0.7 percent, respectively--were largely offset by declines in prices for sporting goods and equipment and in charges for admissions to movies, theaters, concerts, and sporting events--down 1.1 and 0.4 percent, respectively.

The index for other goods and services increased 0.4 percent in July, following a 0.2 percent rise in June. An upturn in the index for personal care--toilet goods, personal care appliances, and personal care services--coupled with a larger increase in the index for tobacco and smoking products, was primarily responsible for the larger advance of this major group in July.

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

On a seasonally adjusted basis, the CPI for Urban Wage Earners and Clerical Workers rose 0.2 percent in July.

Consumer Price Index data for August are scheduled for release on Friday, September 13, 1996, at 8:30 A.M. (EDT). Changing the Hospital and Related Services Component of the Consumer Price Index

Effective with the release of data for January 1997, the Bureau of Labor Statistics (BLS) will introduce improvements in the way in which the Hospital and related services component of the Consumer Price Index (CPI) is calculated. Two complementary changes will be made:

Items within the hospital and related services component will be reclassified into two main groups, or item strata--Hospital services and Nursing home services, instead of the current three--Hospital rooms, Other inpatient services, and Hospital outpatient services. The definition of the specific items selected for pricing within individual hospitals will be broadened substantially. These newly defined items will be reselected using new procedures in the majority of the hospitals from which price data currently are collected for the CPI.

Additional information on these changes will be published in the June 1996 CPI Detailed Report and is available on the Internet. (Go to gopher://stats.bls.gov and access /pub/special.requests/cpi/hospital.txt.) This information may also be obtained by writing to the Bureau of Labor Statistics, Division of Consumer Prices and Price Indexes, 2 Massachusetts Ave. NE, Room 3260, Washington, DC 20212, or by telephoning Elaine Cardenas at (202) 606-6985 ext. 251

Improving the Procedures for Substitute Items

Effective with the Consumer Price Index for July 1996, the Bureau of Labor Statistics has changed the way it determines the weight of replacement items that enter the sample during certain types of item substitutions. Along with earlier improvements in CPI sample rotation procedures, these changes will complete the process of correcting a technical problem that ties an item's weight to its expected price change.

When an outlet stops selling a CPI sample item, or other circumstances make it necessary or desirable for the CPI to replace an item it has been pricing, the CPI field agent finds a replacement item. The object of the substitution process is to find the item in the outlet that is most similar to the one the CPI had been following. About 3.5 percent of all pricings result in substitutions. Whenever there is a substitution, a CPI analyst determines if the new item is comparable to, that is, not significantly different from, the item it replaces. If the item is judged comparable, there is no break in the series or change in the item's weight. About 55 percent of substitutions are comparable. If the substitute is not comparable to the previous item, the analyst may be able to determine the value of the difference and make a quality adjustment to keep the series continuous. CPI analysts adjust for quality in about 15 percent of the substitutions. However, about 30 percent of the substitutes are neither comparable nor adjustable. In this case, the CPI had started the item's series anew and recalculated its base period price, and hence the implicit quantity weight, using the price of the substitute item. This created a situation in which the item's weight was not independent of its probability of price change.

Effective with the CPI for July 1996, the CPI will--except in rare and extreme cases--no longer recalculate the base period price of a noncomparable substitute item. Instead, the CPI will use the originally calculated weight for the item throughout the life of that item series. For more details, see "Improving CPI Item Substitution Procedures" in the July 1996 issue of the CPI Detailed Report.