June 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) rose 0.1 percent before seasonal adjustment in June to a level of 160.3 (1982- 84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in June, the CPI-U increased 2.3 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) also rose 0.1 percent in June, prior to seasonal adjustment. The June 1997 CPI-W level of 157.4 was 2.1 percent higher than the index in June 1996.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.1 percent in June, the same as in each of the preceding three months. The food index increased 0.2 percent in June. Grocery store food prices, which increased 0.6 percent in May, advanced 0.2 percent in June, reflecting a larger decline in the index for dairy products and moderation in the indexes for fruits and vegetables and for meats, poultry, fish, and eggs. The energy index, which declined in each of the preceding three months, was unchanged in June. The index for petroleum-based energy fell 1.1 percent, while the index for energy services rose 1.0 percent. Excluding food and energy, the CPI-U rose 0.1 percent, following an increase of 0.2 percent in May. The smaller advance in June reflects a downturn in the index for apparel and upkeep and a deceleration in the index for household furnishings and operation.

See page 5 for a note on the future use of a hedonic model to adjust prices of personal computers in the CPI for changes in quality. Consumer prices rose at a seasonally adjusted annual rate (SAAR) of 1.0 percent in the second quarter after advancing at a 1.8 percent rate in the first three months of 1997. This brings the year-to-date annual rate to 1.4 percent, the lowest rate for the first six months of the year since 1986 (down 0.2 percent at a SAAR) and notably less than the 3.3 percent increase for 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 largely responsible for the deceleration thus far in 1997. The food index has risen at a 0.9 percent SAAR thus far in 1997, following a 4.3 percent increase in 1996. All major grocery store food categories have shown marked deceleration thus far in 1997, relative to 1996, except for the other food at home group. The larger advance in this latter group is almost entirely due to the sharp acceleration in coffee prices, which have increased at a 45.3 percent annual rate in the first six months of 1997 after declining 6.7 percent in all of 1996. The energy index, which increased 8.6 percent in 1996, declined at a 8.9 percent SAAR in the first six months of 1997. The index for petroleum- based energy fell at a 16.9 percent annual rate, and energy services declined at a 0.2 percent SAAR.

Excluding food and energy, the CPI-U advanced at a 2.4 percent SAAR in the second quarter, the same as in the first quarter of 1997. The 2.4 percent SAAR in the first six months of 1997 was the lowest rate for the first six months of the year since 1965 ( up 1.2 percent at a SAAR) and compares with a 2.6 percent rise for all of 1996. Within this category, the indexes for commodities less food and energy and for services less energy have each advanced at virtually the same rate thus far in 1997 as for all of 1996.

SAAR Percent change 12 months 6 ended in December months ended in June 1989 1990 1991 1992 1993 1994 1995 1996 1997

The food and beverage index rose 0.2 percent in June. The index for grocery store food prices, which advanced 0.6 percent in May, also rose 0.2 percent in June. Smaller increases in the indexes for fruits and vegetables and for meats, poultry, fish, and eggs, coupled with a larger decline in the index for dairy products, were responsible for the moderation. The index for fruits and vegetables rose 0.3 percent in June as an increase in fresh vegetable prices more than offset a decline in fresh fruit prices. Prices for processed fruits and vegetables were, on average, unchanged. The index for meats, poultry, fish, and eggs, which rose 0.5 percent in May, increased 0.1 percent in June, reflecting a downturn in egg prices and a smaller increase in beef prices. The index for beef rose 0.2 percent in June after increasing 1.1 percent in May. The 0.9 percent decrease in the index for dairy products was the eighth consecutive month that this component failed to increase. During this period, dairy product prices have fallen 3.5 percent 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 0.4 and 0.7 percent, respectively. In the latter group, coffee prices continued to surge upwards--up 5.0 percent in June and 19.7 percent in the last four months. The other two components of the food and beverage index- -restaurant meals and alcoholic beverages--increased 0.2 percent and 0.1 percent, respectively.

The housing component rose 0.3 percent in June. Shelter costs increased 0.2 percent, following increases of 0.3 percent in each of the two preceding months. In June, within shelter, renters' costs rose 0.3 percent; homeowners' costs, 0.2 percent; and maintenance and repair costs, 0.1 percent. The index for fuel and other utilities, which had declined in each of the three preceding months, advanced 0.6 percent in June. The index for household fuels rose 0.8 percent, following a 1.1 percent drop in May. The indexes for natural gas and for electricity rose 2.5 and 0.3 percent, respectively. (Prior to seasonal adjustment, charges for electricity increased 6.0 percent, reflecting the switch to summer rates in some areas.) The index for other utilities and public services rose 0.4 percent in June, in part as a result of a 1.0 percent increase in the index for cable television. The index for household furnishings and operation, which increased 0.4 percent in May, was unchanged in June.

The transportation component fell 0.3 percent in June, its third consecutive decline. The index for gasoline declined for the fourth consecutive month, down 0.9 percent in June. (Prior to seasonal adjustment, gasoline prices rose 0.2 percent.) New vehicle purchase costs continued to show little movement; the index for new vehicle prices was unchanged, and automobile finance charges decreased 0.4 percent. The index for used cars declined 1.8 percent in June. Public transportation costs turned down in June. The index for airline fares, which advanced earlier this year, reflecting, in part, the reimposition of the 10 percent federal tax on airline fares effective March 7, declined for the second month in a row--down 1.2 percent in June.

The index for apparel and upkeep declined 0.2 percent in June. (Prior to seasonal adjustment, apparel commodity prices fell 2.4 percent in June, reflecting seasonal price declines.)

Medical care costs rose 0.2 percent in June to a level 2.9 percent above a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--increased 0.1 percent. The index for medical care services rose 0.2 percent. Charges for professional services and hospital and related services increased 0.2 and 0.1 percent, respectively.

Entertainment costs, which rose 0.2 percent in May, increased 0.5 percent in June. Increases in the index for admissions to movies, theaters, concerts, and sporting events and for fees for lessons or instructions--up 1.9 and 1.3 percent, respectively--were responsible for the larger advance.

The index for other goods and services rose 0.2 percent in June, the same as in May. In June, legal service fees rose 1.5 percent, while the index for tobacco and smoking products declined 0.9 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 rose 0.1 percent in June.

Seasonally adjusted Un- Compound adjust- Changes from preceding month annual ed Expenditure rate 12- Category 3-mos. mos. 1996 1997 ended ended Dec. Jan. Feb. Mar. Apr. May June June `97 June`97

After seasonal adjustment, the level of the CPI-U for All Items was 160.3 in June; the seasonally adjusted CPI-W for All Items was 157.2.

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 July are scheduled for release on Thursday, August 14, 1997, at 8:30 A.M. (EDT).

Using a hedonic model to adjust prices of personal computers in the Consumer Price Index for changes in quality

Effective with the release of data for January 1998, the Bureau of Labor Statistics (BLS) will introduce an improved quality adjustment technique in the new stratum of the Consumer Price Index (CPI) called Personal Computers and Peripheral Equipment.

Currently, personal computers are part of the Information Processing Equipment stratum. As previously announced, beginning with the CPI for January 1998, Information Processing Equipment will become an expenditure class entitled Information and Information Processing Other Than Telephone Services. Personal Computers and Peripheral Equipment will be one of four strata in that expenditure class.

Analysts in the Producer Price Index (PPI) program have developed and implemented a regression procedure, called a hedonic model, that decomposes the price of personal computers into implicit prices for each important feature and component of the computer. This model, which has been used in the PPI since 1991, provides a way to estimate the value of changes or improvements. The CPI has used similar hedonic methods to adjust apparel prices for many years.

Starting with the CPI for January 1998, when a personal computer or selected item of peripheral equipment, such as a modem, in the CPI sample improves in some way, a regression-based quality adjustment will be made. The value of the improvement, as derived from the PPI regression estimates, will be deducted from the observed price change for the product. (Conversely, if a model deteriorates, the value of the difference will be added to the price.)

Additional information on these changes will be published in the June 1997 CPI Detailed Report and is available on the Internet (at http://stats.bls.gov/cpihome.htm). This information can also be obtained by writing to Bureau of Labor Statistics, Division of Consumer Prices and Price Indexes, Room 3260, 2 Massachusetts Ave. NE, Washington, DC 20212 or by telephoning Joseph Chelena at (202) 606-6982 ext. 255.