October 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 0.2 percent before seasonal adjustment in October to a level of 161.6 (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 2.1 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 0.1 percent in October, prior to seasonal adjustment. The October 1997 CPI-W level of 158.5 was 1.9 percent higher than the index in October 1996.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.2 percent in October, the same as in each of the preceding three months. The food index increased 0.2 percent in October. Grocery store food prices, which declined slightly in September, also increased 0.2 percent in October, reflecting a sharp increase in prices for dairy products. The energy index, which increased 1.3 percent in September, moderated substantially, rising 0.1 percent in October. The index for petroleum-based energy declined 0.4 percent, while the index for energy services rose 0.5 percent. Excluding food and energy, the CPI-U rose 0.2 percent, the same as in September.

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 10 months of 1997, the CPI -U advanced at a 1.8 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. The energy index has declined at a 2.1 percent SAAR, while food prices have risen at a 1.8 percent annual rate. Excluding food and energy, the CPI-U has risen at a 2.2 percent SAAR in the first 10 months of 1997, following a 2.6 percent increase in all of 1996.

The food and beverage index rose 0.2 percent in October. The index for grocery store food prices, which fell 0.1 percent in September, increased 0.2 percent in October. A sharp increase in the index for dairy products and an upturn in the index for fruits and vegetables were largely responsible for the October advance. Prices for dairy products, which rose 0.1 percent in both August and September after registering declines in each of the preceding eight months, increased 1.5 percent in October. The index for fruits and vegetables rose 0.3 percent in October, following a decline of the same magnitude in September. The index for fresh fruits rose 0.8 percent, while the index for fresh vegetables was unchanged in October. The index for processed fruits and vegetables rose 0.1 percent. The index for cereal and bakery products increased 0.2 percent, the same as in September. Advances in these grocery store food groups was partially offset by the deceleration in the indexes for meats, poultry, fish, and eggs and for other food at home, which declined 0.3 and 0.1 percent, respectively, in October. Within the former group, prices for beef, pork, and poultry all declined in October. The decline in the index for other food at home reflects a drop in coffee prices, which fell 1.8 percent in October, following a 0.5 percent decrease in September. In the six-month period ended in August, coffee prices had registered increases totaling 24.2 percent. The other two components of the food and beverage index--restaurant meals and alcoholic beverages--each increased 0.1 percent.

The housing component rose 0.3 percent in October, the same as in September. Shelter costs rose 0.3 percent. Within shelter, renters' costs increased 0.6 percent; homeowners' costs, 0.2 percent; and maintenance and repair costs, 1.5 percent. The increase in renters' costs reflects a 1.6 percent rise in the index for lodging while out of town; residential rents rose 0.2 percent. The index for fuel and other utilities, which rose 0.6 percent in September, increased 0.3 percent in October. The index for household fuels rose 0.4 percent, as a 2.4 percent increase in the index for natural gas more than offset decreases in the indexes for fuel oil and electricity--each down 0.4 percent. The index for other utilities and public services rose 0.1 percent. The index for telephone services rose 0.2 percent, as increases in charges for local services and interstate toll calls were partially offset by a 0.6 percent drop in charges for intrastate toll calls. The index for household furnishings and operation increased 0.1 percent in October, the same as in September.

The transportation component, which rose 0.4 percent in September, increased 0.1 percent in October. A sharp increase in public transportation costs--up 2.7 percent in October--more than offset a downturn in private transportation costs. The index for airline fares, which rose 2.1 percent in September, increased 3.8 percent in October. Other intercity transportation costs also advanced in October, increasing 1.0 percent. On the other hand, private transportation costs declined 0.2 percent, reflecting decreases in the indexes for new vehicles, used cars, and motor fuel. The index for gasoline, which had increased sharply in each of the two preceding months, declined 0.6 percent in October. (Prior to seasonal adjustment, gasoline prices fell 2.5 percent.) New vehicle purchase costs declined in October; the index for new vehicle prices decreased 0.3 percent and automobile finance charges dropped 0.1 percent. (Prior to seasonal adjustment, new vehicle prices increased 0.4 percent. As of October, about 25 percent of the new vehicle sample was represented by 1998 models. The 1998 models will continue to be phased in, with appropriate adjustments for quality change, over the next several months as they replace old models at dealerships. For a report on quality change for the 1998 vehicles represented in the Producer Price Index sample, see news release USDL-97-403, dated November 14, 1997.) The index for used cars declined 0.5 percent.

The index for apparel and upkeep increased 0.1 percent in October, following a 0.3 percent rise in September. (Prior to seasonal adjustment, apparel commodity prices rose 1.5 percent, reflecting seasonal price increases for fall-winter wear.)

Medical care costs rose 0.1 percent in October to a level 2.5 percent above a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies-was virtually unchanged. The index for medical care services rose 0.1 percent. Charges for professional services and for hospital and related services each increased 0.2 percent.

Entertainment costs, which decreased 0.2 percent in September, rose 0.2 percent in October. Increases in the indexes for club memberships and for fees for participant sports more than offset declines in all other major entertainment categories.

The index for other goods and services rose 0.7 percent in October, following an increase of 0.3 percent in September. The index for tobacco and smoking products, which rose 1.4 percent in September, increased 1.5 percent 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 0.2 percent in October.

After seasonal adjustment, the level of the CPI-U for All Items was 161.6 in October; the seasonally adjusted CPI-W for All Items was 158.5.

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 November are scheduled for release on Tuesday, December 16, 1997, at 8:30 A.M. (EST).

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.