November 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 November to a level of 161.5 (1982-84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in November, the CPI-U has increased 1.8 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) remained unchanged in November, prior to seasonal adjustment. The November 1997 CPI-W level of 158.5 was 1.7 percent higher than the index in November 1996.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.1 percent in November, following increases of 0.2 percent in each of the preceding four months. The food index increased 0.2 percent in November. Grocery store food prices increased 0.1 percent in November, as another sharp increase in prices for dairy products was largely offset by a decline in the index for nonalcoholic beverages. The energy index, which increased 0.1 percent in October, declined 0.2 percent in November. The index for petroleum-based energy declined 1.9 percent, while the index for energy services rose 1.6 percent. Excluding food and energy, the CPI-U rose 0.1 percent after advancing 0.2 percent in October. The smaller advance in November reflects a sharp downturn in airline fares and smaller increases in the indexes for tobacco and smoking products and for shelter.

Beginning with release of the CPI for January 1998 on February 24, 1998, the BLS will introduce a new geographic area sample, a revised item structure, and updated expenditure weights into the CPI. See page 4 for further details.

For the first 11 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 2.1 percent SAAR in the first 11 months of 1997, following a 2.6 percent increase in all of 1996.

The food and beverage index rose 0.1 percent in November. The index for grocery store food prices, which increased 0.2 percent in October, rose 0.1 percent in November. Another sharp increase in the index for dairy products--up 0.9 percent after increasing 1.5 percent in October--was largely offset by a 0.3 percent drop in the index for the other food at home category. This decrease was due to a decline in prices for nonalcoholic beverages as coffee prices fell 2.2 percent and the index for carbonated drinks declined 0.6 percent. The index for fruits and vegetables rose 0.4 percent in November after registering a 0.3 percent increase in October. The index for fresh vegetables rose 3.3 percent, while the index for fresh fruits declined 2.4 percent in November. The index for processed fruits and vegetables rose 0.6 percent. The other two major grocery store food groups--cereal and bakery products and meats, poultry, fish, and eggs- -each increased 0.1 percent. Within the latter group, prices for beef and pork each declined in November, while poultry and egg prices rose 1.2 and 3.2 percent, respectively. The other two components of the food and beverage index--restaurant meals and alcoholic beverages-- rose 0.3 and 0.1 percent, respectively.

The housing component rose 0.3 percent in November, the same as in each of the two preceding months. Shelter costs rose 0.2 percent. Within shelter, renters' costs were unchanged as a decline in the index for lodging while out of town offset a 0.2 percent rise in residential rents. Homeowners' costs rose 0.3 percent and maintenance and repair costs increased 0.1 percent. The index for fuel and other utilities, which increased 0.3 percent in October, advanced 0.9 percent in November. The index for household fuels rose 1.5 percent, reflecting increases of 3.1 percent in the index for natural gas, 0.9 percent in the index for electricity, and 0.1 percent in the index for fuel oil. (Prior to seasonal adjustment, charges for electricity fell 1.5 percent, reflecting the shift to off-season rates in some areas.) The index for other utilities and public services rose 0.3 percent. The index for telephone services rose 0.2 percent, as charges for intrastate toll calls increased 1.2 percent after declining 0.6 percent in October. The index for household furnishings and operation increased 0.1 percent in November, the same as in each of the two preceding months.

The transportation component, which increased 0.1 percent in October, declined 0.7 percent in November. The indexes for motor fuels and new vehicles declined for the second consecutive month and public transportation costs turned down in November. The index for gasoline, which declined 0.6 percent in October, fell 2.3 percent in November. New vehicle purchase costs declined again in November; the index for new vehicle prices decreased 0.2 percent and automobile finance charges dropped 1.1 percent. (Prior to seasonal adjustment, new vehicle prices increased 0.5 percent. As of November, about 45 percent of the new vehicle sample was represented by 1998 models. The 1998 models will continue to be phased in over the next several months as they replace old models at dealerships.) The index for used cars declined 0.1 percent. Public transportation costs declined 2.3 percent in November. The index for airline fares, which rose 3.8 percent in October, declined 3.9 percent in November. Other intercity transportation costs also declined in November, decreasing 0.3 percent.

The index for apparel and upkeep increased 0.2 percent in November, following a 0.1 percent rise in October. (Prior to seasonal adjustment, apparel commodity prices fell 0.1 percent.)

Medical care costs rose 0.3 percent in November to a level 2.6 percent above a year ago. The index for medical care commodities-- prescription drugs, nonprescription drugs, and medical supplies--rose 0.2 percent. The index for medical care services rose 0.4 percent. Charges for professional services and for hospital and related services increased 0.1 and 0.4 percent, respectively.

Entertainment costs, which rose 0.2 percent in October, decreased 0.2 percent in November, reflecting declines in most entertainment commodity and service categories.

The index for other goods and services rose 0.3 percent in November, following an increase of 0.7 percent in October. The moderation was largely due to a smaller increase in the index for tobacco and smoking products, which rose 0.1 percent, following increases of 1.4 and 1.5 percent 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 0.1 percent in November.

After seasonal adjustment, the level of the CPI-U for All Items was 161.8 in November; the seasonally adjusted CPI-W for All Items was 158.6.

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 December are scheduled for release on Tuesday, January 13, 1998, at 8:30 A.M. (EST). Releases for the remainder of 1998:

Planned CPI Publication Changes

Beginning in 1998, the Bureau of Labor Statistics (BLS) will introduce a new geographic area sample, a revised item structure and updated expenditure weights into the Consumer Price Index (CPI). Approximately every ten years the CPI undertakes this type of revision in order to keep the index up-to-date. Since World War II, revisions of the CPI have been introduced in 1953, 1964, 1978, and 1987.

Because the changes the CPI undergoes during each revision can have a major impact on our users, special steps are taken in order to ameliorate the effects of these changes. Beginning with the release of the January, 1997 index, data series that are changing or being dropped from publication have been footnoted in all BLS published tables. This provided an early warning to users to reconsider their use of those indexes and provided time for them to make changes in their use. The 1998 CPI Revision contains substantial changes in both the items being presented and the frequency of local area index publication.

Changes to the Item Structure

Effective in 1998, there will be considerable changes to both the items being priced and the manner in which they are being aggregated in the CPI. The most notable change in presentation is a reconstruction of several major groups with a resulting change from the currently available seven major groups to the new total of eight.

Currently the major groups are: Food and Beverages, Housing, Apparel and Upkeep, Transportation, Medical Care, Entertainment and Other Goods and Services. Three of these groups-- Food and Beverages, Transportation, and Medical care will remain the same. The Apparel group was modified to exclude apparel upkeep products and services. The Entertainment group has been slightly redefined into a major group called Recreation and a new major group, Education and Communication, has been formed from past subelements of the Housing, Entertainment and Other Goods and Services groups

Other important changes in our item structure at lower levels are an expansion of our Food Away from Home index, a reorientation of our car and truck indexes to a vehicle index, and the expansion of our information processing equipment index.

For a complete listing of the new CPI Publication Structure see Table X.

Changes to the Geographic Structure

In each revision, the CPI geographic sample is selected to be representative of the current demographics of the United States. The 1998 revision utilizes the 1990 Census of population. The CPI develops an updated area sample design, decides on new local area indexes and changes the frequency of publication for local area indexes in order to better reflect these new demographics.

In addition to the national index, the BLS currently publishes indexes for 29 metropolitan areas. In 1998, it will continue to publish indexes for all but two of these areas--Buffalo-Niagara Falls, NY, and New Orleans, LA. Due to the revised Metropolitan Area (MA) definitions issued by the Office of Management and Budget(OMB), two other areas, Washington, DC, and Baltimore, MD, which the BLS currently publishes separately, constitute a new Consolidated Metropolitan Statistical Area. A single index will be published for this consolidated area.

The new publication plan for local area indexes, to begin with the index for January 1998, is summarized below:

* Monthly indexes will be published for the three largest metropolitan areas. Because of sample design considerations, indexes for the Philadelphia and San Francisco areas, both currently published monthly, will be published every other month following the release of the December, 1997 index.

* Bimonthly indexes will be published for the next 11 largest areas, including Atlanta and Seattle, which currently have semiannual average indexes.

* Semiannual average indexes will be published for 12 additional areas, including Pittsburgh and St. Louis, which currently have bimonthly indexes.

* The BLS will continue to publish separate indexes for the four Census regions of the United States. However, beginning in 1998, there will only be two area size classes for metropolitan areas, instead of the current three: Size A - areas with a population greater than 1.5 million; and Size B/C - areas with less than 1.5 million population. This cutoff of 1.5 million in population reflects a rise from the current cutoff of 1.2 million and is important since cities in size class A are those for which the Bureau publishes city level indexes. The B/C size class is a combination of the old Size B and Size C metropolitan areas. In addition to the two metropolitan area size indexes for each region, separate Size D indexes for urban non-metropolitan areas will continue to be published for both the Midwest and the South. Separate indexes for Northeast and West urban nonmetropolitan areas were discontinued in 1987.

The following is the full list of areas for which indexes will be published, beginning in January, 1998:

1. Metropolitan Areas for which a local index will be published monthly:

New York-Northern New Jersey-Long Island, NY-NJ-CT-PA Chicago-Gary-Kenosha, IL-IN-WI Los Angeles-Riverside-Orange County, CA

2. Metropolitan Areas for which a local index will be published bimonthly:

In Odd Months (i.e. January, In Even Months (i.e. March, etc.) February, April, etc.)

Boston-Brockton-Nashua, MA-NH- Philadelphia-Wilmington- ME-CT Atlantic City, PA-NJ-DE-MD

Washington-Baltimore, DC-MD- San Francisco-Oakland-San VA-WV Jose, CA

Cleveland-Akron, OH Houston-Galveston-Brazoria, TX Atlanta, GA Detroit-Ann Arbor-Flint, MI Dallas-Fort Worth, TX Miami-Fort Lauderdale, FL Seattle-Tacoma-Bremerton, WA

3. Metropolitan Areas for which a local index will be published semiannually (In January and July)

Pittsburgh, PA Cincinnati-Hamilton, OH-KY-IN Kansas City, MO-KS Milwaukee-Racine, WI Minneapolis-St. Paul, MN-WI St. Louis, MO-IL Tampa-St. Petersburg-Clearwater, FL Anchorage, AK Denver-Boulder-Greeley, CO Honolulu, HI Portland-Salem, OR-WA San Diego, CA

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.