July 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 July to a level of 160.5 (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 2.2 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) also rose 0.1 percent in July, prior to seasonal adjustment. The July 1997 CPI-W level of 157.5 was 2.1 percent higher than the index in July 1996.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.2 percent in July, following increases of 0.1 percent in each of the preceding four months. The food index increased 0.3 percent in July. Grocery store food prices, which increased 0.2 percent in June, advanced 0.3 percent in July, reflecting larger increases in the indexes for meats, poultry, fish, and eggs and for fruits and vegetables. The energy index continued to exert a moderating effect on the CPI-U, declining 0.1 percent in July. The index for petroleum-based energy fell 0.4 percent, while the index for energy services rose 0.2 percent. Excluding food and energy, the CPI-U rose 0.2 percent, following an increase of 0.1 percent in June. The larger advance in July reflects upturns in the indexes for transportation (other than for motor fuel) and for apparel and upkeep.

See page 4 for a note on the future use of a hedonic model to adjust personal computer prices in the CPI for changes in quality.

For the first seven months of 1997, the CPI-U advanced at a 1.5 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 3.3 percent in all of 1996. The energy and food components have been largely responsible for the moderation thus far in 1997. After advancing substantially in 1996, the energy index has declined at a 7.9 percent SAAR, while food prices have risen at a 1.3 percent annual rate. Excluding food and energy, the CPI-U has risen at a 2.4 percent SAAR in the first seven months of 1997, following a 2.6 percent increase in all of 1996.

The food and beverage index rose 0.3 percent in July. The index for grocery store food prices, which rose 0.2 percent in June, advanced 0.3 percent in July, reflecting larger increases in the indexes for meats, poultry, fish, and eggs and for fruits and vegetables. The index for meats, poultry, fish, and eggs rose 0.5 percent in July after increasing 0.1 percent in June, as a result of an upturn in egg prices and a larger increase in beef prices. Egg prices advanced 2.9 percent in July, following a 3.3 percent decline in June. The index for beef, which rose 0.2 percent in June, increased 0.7 percent in July. The index for fruits and vegetables rose 0.5 percent in July as an increase in the index for fresh vegetables more than offset declines in the indexes for fresh fruits and for processed fruits and vegetables. The index for dairy products decreased 0.6 percent in July, the ninth consecutive month that this component failed to increase. During this period, dairy product prices have fallen 4.0 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 0.1 and 0.6 percent, respectively. In the latter group, coffee prices continued to surge upwards--up 3.1 percent in July and 23.5 percent in the last five months. The other two components of the food and beverage index--restaurant meals and alcoholic beverages-each increased 0.3 percent.

The housing component rose 0.2 percent in July after increasing 0.3 percent in June. Shelter costs increased 0.2 percent. Within shelter, renters' costs declined 0.1 percent, while homeowners' costs and maintenance and repair costs increased 0.4 and 1.5 percent, respectively. The decline in renters' costs reflects a 0.7 percent decrease in the index for lodging while out of town; residential rents rose 0.2 percent. (Prior to seasonal adjustment, the index for lodging while out of town rose 2.8 percent.) The index for fuel and other utilities, which advanced 0.6 percent in June, rose 0.2 percent in July. The index for household fuels was unchanged, following a 0.8 percent increase in June. A 1.1 percent increase in the index for natural gas was largely offset by declines in the indexes for electricity and for fuel oil--down 0.2 and 2.9 percent, respectively. The index for other utilities and public services rose 0.5 percent in July, reflecting increases of 1.1 percent in the index for cable television and 0.9 percent in the index for water and sewerage treatment. The index for household furnishings and operation, which was unchanged in June, declined 0.2 percent in July.

The transportation component rose 0.1 percent in July, following declines in each of the three preceding months. The index for gasoline declined for the fifth consecutive month, down 0.4 percent in July. (Prior to seasonal adjustment, gasoline prices fell 1.8 percent.) New vehicle purchase costs advanced somewhat more in July than in recent months; the index for new vehicle prices rose 0.1 percent, and automobile finance charges increased 1.6 percent. (Prior to seasonal adjustment, new vehicle prices declined 0.3 percent.) The index for used cars declined 1.1 percent. Public transportation costs turned up in July. The index for airline fares, which had declined 1.3 and 1.2 percent, respectively, in the two preceding months, rose 2.3 percent in July.

The index for apparel and upkeep increased 0.2 percent in July. (Prior to seasonal adjustment, apparel commodity prices fell 1.9 percent, reflecting seasonal price declines for spring and summer wear.)

Medical care costs were virtually unchanged in July, and the July 1997 index was 2.7 percent above its level a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--decreased 0.1 percent. Charges for medical care services rose 0.1 percent. The indexes for professional services and for hospital and related services increased 0.1 percent and were virtually unchanged, respectively.

Entertainment costs, which increased 0.5 percent in June, rose 0.1 percent in July. A substantially smaller increase in the index for admissions to movies, theaters, concerts, and sporting events--up 0.2 percent in July, following a 1.9 percent rise in June--and a decline in the index for reading materials were responsible for the moderation.

The index for other goods and services rose 0.3 percent in July. The index for tobacco and smoking products rose 0.4 percent, following declines of 0.5 and 0.9 percent, respectively, in the two preceding months..

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.

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

After seasonal adjustment, the level of the CPI-U for All Items was 160.6 in July; the seasonally adjusted CPI-W for All Items was 157.5.

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 August are scheduled for release on Tuesday, September 16, 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.