May 1997 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) declined 0.1 percent before seasonal adjustment in May to a level of 160.1 (1982- 84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in May, the CPI-U increased 2.2 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) was unchanged in May, prior to seasonal adjustment. The May 1997 CPI-W level of 157.2 was 2.1 percent higher than the index in May 1996.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.1 percent in May, the same as in each of the preceding two months. The food index, which declined 0.2 percent in April, advanced 0.4 percent in May. Grocery store food prices rose 0.6 percent, reflecting a sharp turnaround in the index for fruits and vegetables. The energy index declined for the third consecutive month, down 2.4 percent in May. The index for petroleum- based energy fell 3.6 percent, and the index for energy services declined 1.3 percent. Excluding food and energy, the CPI-U rose 0.2 percent, following an increase of 0.3 percent in April. The smaller advance in May reflects downturns in the indexes for airline fares and tobacco and smoking products and a deceleration in the index for apparel and upkeep.

For the first five months of 1997, the CPI-U advanced at a 1.4 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 3.3 percent in all of 1996. The food and energy components, which had accelerated in 1996 after acting as moderating influences throughout most of the preceding five years, were responsible for the slower rate thus far in 1997. The food index rose at a 0.6 percent SAAR thus far in 1997, following a 4.3 percent increase in 1996. The energy index, which increased 8.6 percent in 1996, declined at a 10.6 percent SAAR in the first five months of 1997. The CPI-U excluding food and energy advanced at a 2.6 percent SAAR in the first five months of 1997, the same rate as the 2.6 percent rise for all of 1996.

The food and beverage index rose 0.4 percent in May. The index for grocery store food prices, which declined 0.4 percent in April, advanced 0.6 percent in May, reflecting a sharp upturn in the index for fruits and vegetables--up 1.8 percent in May after declining 3.4 percent in April. (Prior to seasonal adjustment, fruit and vegetable prices were, on average, unchanged.). The index for meats, poultry, fish, and eggs, which turned up in April, following declines in the first three months of 1997, rose 0.5 percent in May. The index for beef rose 1.1 percent in May after increasing 0.6 percent in April. The 0.2 percent decrease in the index for dairy products was the seventh consecutive month that this component failed to increase after registering increases totaling 8.5 percent in the preceding five-month period. The indexes for cereal and bakery products and for other food at home rose 0.3 and 0.1 percent, respectively. In the latter group, coffee prices continued to surge upwards-up 2.8 percent in May and 14.1 percent in the last three months. Declines in prices for prepared foods helped to mitigate this increase. The other two components of the food and beverage index--restaurant meals and alcoholic beverages-- increased 0.1 percent and 0.3 percent, respectively.

The housing component rose 0.1 percent in May. Shelter costs increased 0.3 percent, the same as in April. In May, within shelter, renters' costs rose 0.2 percent; homeowners' costs, 0.3 percent; and maintenance and repair costs, 0.5 percent. The index for fuel and other utilities declined for the third consecutive month, down 0.6 percent in May. The index for household fuels fell 1.1 percent, reflecting declines in the indexes for natural gas, fuel oil, and electricity--down 2.9, 0.5, and 0.4 percent, respectively. Charges for natural gas have decreased 9.8 percent in the past three months after increasing 17.3 percent in the preceding 11-month period. The index for household furnishings and operation increased 0.4 percent in May; a 1.4 percent rise in the index for furniture and bedding was partially offset by declines in prices for most other housefurnishings and major appliances.

The transportation component fell 0.8 percent in May, its fourth decline in five months this year. The index for gasoline declined 4.1 percent, its largest drop since a 4.6 percent decrease in March 1991. (Prior to seasonal adjustment, gasoline prices, which normally increase sharply at this time of year with the advent of the driving season, fell 0.2 percent.) New vehicle purchase costs also declined in May; the index for new vehicle prices fell 0.2 percent, and automobile finance charges decreased 2.5 percent. The May downturn in finance charges followed increases in each of the first four months of 1997 totaling 2.2 percent. The index for used cars declined 0.9 percent in May. Public transportation costs, which rose substantially in March and April, decelerated in May. The index for airline fares, which rose 4.5 and 1.2 percent in the two preceding months, reflecting, in part, the reimposition of the 10 percent federal tax on airline fares effective March 7, declined 1.3 percent in May.

The index for apparel and upkeep, which increased 0.9 percent in April, rose 0.1 percent in May. (Prior to seasonal adjustment, apparel commodity prices fell 0.7 percent in May, largely reflecting seasonal price declines for women's and girls' clothing.)

Medical care costs rose 0.3 percent in May to a level 3.0 percent above a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--increased 0.4 percent. The index for medical care services rose 0.3 percent. Charges for professional services and hospital and related services increased 0.3 and 0.2 percent, respectively. Entertainment costs, which rose 0.1 percent in April, increased 0.2 percent in May. (Prior to seasonal adjustment, this index was unchanged as a 0.1 percent decline in entertainment commodities was offset by a 0.1 percent increase in entertainment services.)

The index for other goods and services rose 0.2 percent in May, following an increase of 0.8 percent in April. The index for tobacco and smoking products, which rose 2.4 percent in April, declined 0.5 percent in May.

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

On a seasonally adjusted basis, the CPI for Urban Wage Earners and Clerical Workers was unchanged in May.

After seasonal adjustment, the level of the CPI-U for All Items was 160.1 in May; the seasonally adjusted CPI-W for All Items was 157.0.

Beginning with January 1997 data, BLS is reporting the level of the seasonally adjusted U.S. City Average All Items CPI-U and CPI-W in this monthly news release. Effective with the release of January 1998 data in February 1998, the seasonally adjusted All Items indexes will be fully integrated into the releases, appearing in tables 2 and 5 and in the text where relevant.

Like other seasonally adjusted CPI data, 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.

Consumer Price Index data for June are scheduled for release on Wednesday, July 16, 1997, at 8:30 A.M. (EDT).

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-11-ARIMA Seasonal Adjustment Method (1988). 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 1992 through 1996 were replaced at the end of 1996. The seasonal movement of all items and 47 other aggregations is derived by combining the seasonal movement of 60 selected components. Each year the seasonal status of every series is reevaluated based upon certain statistical criteria. If any of the 60 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.

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 some women's apparel indexes and the girls' apparel index, the procedure was used to offset the effects of changes in pricing methodology. For the tobacco and smoking products index, this procedure was used to offset the effects of increases in excise taxes and wholesale tobacco prices. For some alcoholic beverage series, Intervention Analysis Seasonal Adjustment was used to offset the effects of excise tax increases. 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 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) 606-6968.