February 1998 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 in February before seasonal adjustment to a level of 161.9 (1982- 84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in February, the CPI-U has increased 1.4 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 0.1 percent in February, prior to seasonal adjustment. The February 1998 CPI-W level of 158.5 was 1.1 percent higher than the index in February 1997.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.1 percent in February after being unchanged in January. The food index, which advanced 0.3 percent in January, was unchanged in February. Grocery store food prices declined 0.1 percent after increasing 0.4 percent in January, reflecting a sharp turnaround in the index for fruits and vegetables. The energy index declined sharply for the third consecutive month--down 2.2 percent in February. The index for petroleum-based energy decreased 3.3 percent, and the index for energy services declined 1.2 percent. Excluding food and energy, the CPI-U rose 0.3 percent, following an increase of 0.2 percent in January. Larger advances in shelter costs and tobacco prices, coupled with an upturn in the index for apparel, were responsible for the larger February increase.

The food and beverages index was unchanged in February. The index for grocery store food prices, which rose 0.4 percent in January, declined 0.1 percent in February, due to a sharp turnaround in the index for fruits and vegetables--down 0.8 percent in February after registering a 2.9 percent increase in January. The index for fresh vegetables fell 7.2 percent, more than offsetting a 5.8 percent rise in the index for fresh fruits. (Prior to seasonal adjustment, fresh vegetable prices declined 10.0 percent, while fresh fruit prices were virtually unchanged.) The index for processed fruits and vegetables fell 0.7 percent. Among the other major grocery store food groups, the indexes for dairy and related products and for meats, poultry, fish, and eggs also declined-down 0.4 and 0.1 percent, respectively. Within the latter group, prices for beef declined 0.6 percent, while the indexes for pork and poultry each increased 0.1 percent. The other three major groups--cereal and bakery products, nonalcoholic beverages, and other food at home--each registered a small increase. The other two components of the food and beverage index--food away from home and alcoholic beverages--rose 0.3 and declined 0.1 percent, respectively.

The housing component rose 0.1 percent in February, the same as in January. Shelter costs rose 0.3 percent. Within shelter, the index for rent rose 0.1 percent, owners' equivalent rent increased 0.3 percent, and the cost of lodging away from home increased 0.5 percent. The index for fuels and utilities, which decreased 1.2 percent in January, fell 0.9 percent in February. The index for household fuels declined 1.3 percent, reflecting decreases in the indexes for fuel oil (3.0 percent), natural gas (1.5 percent), and electricity (1.2 percent). The index for household furnishings and operation increased 0.3 percent in February.

The transportation component declined for the fourth consecutive month, down 0.4 percent in February. For the second consecutive month, a sharp drop in the index for motor fuels more than offset a large increase in the index for public transportation. The index for gasoline fell 3.4 percent in February and has declined 10.8 percent in the last five months. As of February, gasoline prices were 21.3 percent lower than their peak level of November 1990. The index for new and used vehicle prices was unchanged; the index for new vehicles declined 0.1 percent, and used car and truck prices rose 0.2 percent. (As of February, about 85 percent of the new vehicle sample was represented by 1998 models.) Public transportation costs rose 1.4 percent in February. The index for airline fares increased substantially for the second consecutive month, up 3.2 percent in February, following a 2.7 percent rise in January. The index for other intercity transportation also rose substantially in February-up 1.5 percent.

The index for apparel increased 0.2 percent in February, following a 0.5 percent decline in January. (Prior to seasonal adjustment, apparel prices rose 1.6 percent, reflecting the introduction of higher priced spring-summer wear.)

Medical care costs rose 0.3 percent in February to a level 2.8 percent above a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--rose 0.1 percent. The index for medical care services rose 0.4 percent. Charges for professional services and for hospital and related services increased 0.2 and 0.5 percent, respectively.

Recreation costs rose 0.3 percent in February, the same as in January. Increases in the indexes for admissions to movies, theaters, concerts, and sporting events, for newspapers and magazines, and for cable television accounted for about three-fourths of the February advance.

The index for education and communication declined 0.1 percent in February. A 0.3 percent increase in education costs was more than offset by a 0.4 percent decrease in communication costs. Within the communication category, declines in the indexes for personal computers and peripheral equipment and for cellular telephone services--down 5.8 and 0.9 percent, respectively--were responsible for the decrease.

The index for other goods and services rose 0.8 percent in February. About three-fourths of the advance was accounted for by a 2.9 percent increase in the index for tobacco and smoking products. Several cigarette companies raised their wholesale prices in late January.

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 February.

Consumer Price Index data for March are scheduled for release on Tuesday April 14, 1998, at 8:30 A.M. (EDT).

CPI (Old Series)

For the first six months of 1998, BLS also will calculate Old Series CPI-U and Old Series CPI-W based on the 1982-84 expenditure pattern used in the CPI from 1987 through 1997. These Old Series data are contained in tables 1(OS)-4(OS). From January to February, the Old Series CPI-U and the Old Series CPI-W each rose 0.2 percent. Note these series are not seasonally adjusted.

Overview of Publication Changes

Beginning in 1998, the Bureau of Labor Statistics (BLS) introduced 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 are 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.

Formerly the major groups were: 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 developed an updated area sample design, decided on new local area indexes and changed the frequency of publication for local area indexes in order to better reflect these new demographics.

In addition to the national index, the BLS formerly published indexes for 29 metropolitan areas. In 1998, it continues 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 formerly published separately, constitute a new Consolidated Metropolitan Statistical Area. A single index is now published for this consolidated area.

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

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

* Bimonthly indexes are published for the next 11 largest areas, including Atlanta and Seattle, which used to have semiannual average indexes.

* Semiannual average indexes are now published for 12 additional areas, including Pittsburgh and St. Louis, which formerly had bimonthly indexes.

* The BLS continues to publish separate indexes for the four Census regions of the United States. However, beginning in 1998, there are only 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 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 are currently published, beginning in January, 1998:

1. Metropolitan Areas for which a local index is 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 is 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 Atlanta, GA

Dallas-Fort Worth, TX Houston-Galveston-Brazoria, TX

Detroit-Ann Arbor-Flint, MI

Miami-Fort Lauderdale, FL

Seattle-Tacoma-Bremerton, WA

3. Metropolitan Areas for which a local index is 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

BLS to Maintain Current Reference Base of 1982-84-100 for most CPI index series The Bureau of Labor Statistics (BLS) previously indicated its intention to change the numerical reference base for both the Consumer Price Index for All Urban Consumers (CPI-U) and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from their present 1982-84=100 base to a 1993-95=100 base, effective with release of the January 1999 index in February 1999. BLS also indicated that the alternate, or 1967=100 base, would be discontinued in 1999 as well. This plan was initially described in the December 1996 Monthly Labor Review, a publication which contained several articles that dealt with the 1998 CPI Revision.

The BLS has now decided not to implement this rebasing plan. Instead, the BLS will maintain the reference base of 1982-84=100 used for most items. In addition, the 1967=100 reference base will continue to be the alternate base for the All Items indexes. This decision is based in part on the fact that historical data have less precision after rebasing. Rebasing is simply an arithmetic transformation that does not substantially impact the index. Because the rebased index values are smaller, however, the loss of precision due to rounding is more serious. In addition, retaining the old index reference bases would spare users the inconvenience associated with conversion.

Changes in the numerical reference base should not be confused with the plans by BLS to update the market basket of the CPI. With release of the January CPI in February 1998, the expenditure weights applied to CPI categories will be based on consumer spending patterns for 1993-95.

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-12-ARIMA Seasonal Adjustment Method. 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 1993 through 1997 were replaced at the end of 1997. The seasonal movement of all items and 54 other aggregations is derived by combining the seasonal movement of 73 selected components. Each year the seasonal status of every series is reevaluated based upon certain statistical criteria. If any of the 73 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.

Seasonally adjusted data, including 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.

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.