October 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 0.3 percent before seasonal adjustment in October to a level of 158.3 (1982-84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in October, the CPI- U increased 3.0 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) also rose 0.3 percent in October, prior to seasonal adjustment. The October 1996 CPI-W level of 155.5 was 3.0 percent higher than the index in October 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 October, the same as in September. The food index rose 0.6 percent in September, reflecting sharp increases in prices for dairy products and for fresh fruits and vegetables. The energy index registered its first increase since May, advancing 0.7 percent in October. The index for petroleum-based energy increased 1.4 percent, while the index for energy services was unchanged. Excluding food and energy, the CPI-U rose 0.2 percent, following a 0.3 percent increase in September. Declines in vehicle purchase costs and in the index for household furnishings and operation and a smaller increase in the index for airline fares more than offset a larger increase in shelter costs.

During the first 10 months of 1996, the CPI-U rose at a 3.3 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 6.7 percent rate, with petroleum- based energy advancing at a 10.5 percent SAAR. The food index has risen at a 4.7 percent annual rate in the first 10 months after increasing 2.1 percent in all of 1995. Excluding food and energy, the CPI-U advanced at a 2.8 percent rate in the first 10 months of 1996. This compares with a 3.0 percent increase for all of 1995.

The food and beverage index rose 0.6 percent in October. The recent surge in grocery store food prices continued in October with an advance of 0.7 percent, bringing the increase over the past 5 months to 3.4 percent. Increases in the indexes for dairy products and for fresh fruits and vegetables--up 1.7 and 2.4 percent, respectively--accounted for over three-fourths of the October advance. The index for dairy products has risen 8.6 percent in the past 5 months and 12.1 percent since October 1995. Prior to the October advance, the index for fresh fruits and vegetables had declined 0.5 percent in each of the 2 preceding months. Among the other major grocery store food groups, the index for meats, poultry, fish, and eggs increased 0.5 percent in October, following advances totaling 4.1 percent in the 4 months ended in September. The index for pork, which had increased 9.6 percent in the previous 5-month period, rose 0.1 percent in October. The indexes for beef and for poultry increased 0.6 and 0.8 percent, respectively. The index for cereal and bakery products rose 0.2 percent, the same as in September. The index for other food at home increased 0.1 percent in October. The other two components of the food and beverage index-- restaurant meals and alcoholic beverages--increased 0.5 and 0.4 percent, respectively.

The housing component rose 0.3 percent in October. Shelter costs increased 0.3 percent, following a rise of 0.2 percent in September. Within shelter, renters' costs and homeowners' costs each rose 0.3 percent, and maintenance and repair costs increased 0.2 percent. The index for fuel and other utilities rose 0.5 percent. Household fuels increased 0.7 percent, reflecting a 7.0 percent rise in the index for fuel oil. A 0.7 percent increase in charges for natural gas was offset by a 0.2 percent decline in the index for electricity. Among other utilities and public services, the index for cable television rose 0.5 percent in October to a level 7.7 percent higher than a year ago. The index for household furnishings and operation declined 0.1 percent in October, following increases of 0.2 percent in each of the preceding 2 months.

The transportation index increased 0.1 percent in October, following a rise of 0.5 percent in September. The index for gasoline registered its first increase since May, advancing 0.7 percent in October after declining 8.0 percent in the preceding 4-month period. (Prior to seasonal adjustment, gasoline prices continued to fall--down 0.5 percent.) As of October, the gasoline index was 11.4 percent below its peak level of December 1990. Automobile purchase costs, which had risen substantially in September, declined in October. The index for new vehicles, which increased 0.6 percent in September, fell 0.2 percent in October. (Prior to seasonal adjustment, new vehicle prices rose 0.4 percent. As of October, nearly 30 percent of the new vehicle sample was represented by 1997 models. The 1997 models will continue to be phased in over the next several months as they replace old models at dealerships. For a report on quality changes for the 1997 vehicles, see news release USDL-96-472, dated November 13, 1996.) The index for automobile finance charges declined 0.3 percent in October, its first decrease since February. The index for used cars also turned down in October, declining 0.3 percent after increasing 0.3 percent in September. The index for airline fares, which increased 2.9 percent in September, rose 1.9 percent in October.

The index for apparel and upkeep rose 0.5 percent in October, the same as in September after declining 1.4 percent in August. The proportion of higher priced fall-winter wear in the sample in September and October was about normal in contrast to August, which was characterized by the slower than usual introduction of the seasonal clothing. (Prior to seasonal adjustment, clothing prices rose 1.7 percent in October.) Medical care costs rose 0.2 percent in October to a level 3.2 percent above a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--increased 0.5 percent in October. The index for medical care services rose 0.2 percent. Charges for professional services and hospital and related services increased 0.3 and 0.1 percent, respectively.

Entertainment costs rose 0.1 percent in October, the same as in September. Declines in the index for admissions (to movies, theaters, concerts, etc.), for fees for participant sports, and for sporting goods partially offset small to moderate increases in most other entertainment components.

The index for other goods and services, which was virtually unchanged in September, increased 0.4 percent in October. The index for personal and educational expenses, which declined 0.2 percent in September, rose 0.4 percent in October. The index for tobacco products increased 0.7 percent for the second consecutive month in October.

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 0.3 percent in October.

Consumer Price Index data for November are scheduled for release on Thursday, December 12, 1996, at 8:30 A.M. (EST). 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 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 pricing 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. New Seasonal Adjustment Method to be Implemented

Effective with the release of revised seasonally adjusted data for 1992- 1996 on February 14, 1997, the Bureau of Labor Statistics (BLS) will begin using X-12-ARIMA seasonal adjustment software (developed by the Bureau of the Census) for performing Intervention Analysis Seasonal Adjustment (IASA) for selected CPI series. The X-12 ARIMA methodology incorporates a number of technical enhancements that improve the estimation of seasonal factors. This change will affect 20 CPI series. In addition, all remaining Consumer Price Index series requiring seasonal adjustment will be processed using X-12-ARIMA software beginning in February 1998. Seasonal adjustment methods in the Producer Price Index will change in similar fashion.

Each year with the release of the January CPI, seasonal adjustment factors are recalculated to reflect price movements from the just- completed calendar year. This routine annual recalculation may result in revisions to seasonally adjusted indexes for the previous 5 years. BLS will make available recalculated seasonally adjusted indexes, as well as recalculated seasonal adjustment factors, for the period January 1992 through December 1996, at 8:30 a.m. on Friday, February 14, 1997. Seasonal factors for 1997 for directly adjusted series will also be available. This date is two working days before the scheduled release of the January 1997 CPI on Wednesday, February 19, 1997.

The revised indexes and seasonal factors will be available on the internet at gopher://stats.bls.gov. Choose the "special requests" directory, and then the "cpi" directory. The revised seasonal data will be in the file revseas.cpi.