March 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 March before seasonal adjustment to a level of 162.2 (1982- 84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in March, 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 March, prior to seasonal adjustment. The March 1998 CPI-W level of 158.7 was 1.1 percent higher than the index in March 1997.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U was unchanged in March, following a 0.1 percent rise in February. The food index was unchanged for the second consecutive month. Grocery store food prices decreased 0.1 percent in March, the same as in February, reflecting declines in the indexes for fruits and vegetables, for meats, poultry, fish, and eggs, and for nonalcoholic beverages. The energy index declined sharply for the fourth consecutive month--down 1.2 percent in March. The index for petroleum-based energy decreased 3.1 percent, while the index for energy services increased 0.2 percent. Excluding food and energy, the CPI-U rose 0.1 percent, following an increase of 0.3 percent in February. Declines in the indexes for apparel and for tobacco, coupled with a smaller increase in shelter costs, were largely responsible for the deceleration.

For the first 3-months of 1998, the CPI-U advanced at a 0.2 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 1.7 percent in all of 1997. Falling energy prices were responsible for the deceleration in the first quarter of 1998. The energy index, which decreased 3.4 percent in 1997, declined at a 21.1 percent SAAR in the first three months of 1998. Petroleum-based energy costs fell at a 33.3 percent SAAR, while charges for energy services decreased at a 9.4 percent annual rate. The food index rose at a 1.3 percent SAAR thus far in 1998, following a 1.5 percent increase in 1997. Grocery store food prices increased at a 0.5 percent SAAR in the first 3 months, as the declines in the indexes for meats, poultry, fish, and eggs and for nonalcoholic beverages were more than offset by increases in the four other major grocery store food groups. The CPI-U excluding food and energy advanced at a 2.4 percent SAAR in the first 3 months of 1998, following a 2.2 percent rise for all of 1997, which was the smallest annual increase in this index since a 1.5 percent rise in 1965. The rates for selected groups for the last four and one-quarter years are shown below.

Percent change

In March, the food and beverages index was unchanged for the second consecutive month. The index for grocery store food prices declined 0.1 percent in March, the same as in February. Decreases in the indexes for fruits and vegetables, for meats, poultry, fish, and eggs, and for nonalcoholic beverages more than offset moderate increases in the other major grocery store food groups. The index for fruits and vegetables declined 1.0 percent in March, reflecting decreases in the indexes for both fresh fruits--down 2.6 percent--and fresh vegetables--down 0.3 percent. The index for processed fruits and vegetables rose 0.8 percent. The index for meats, poultry, fish, and eggs declined for the fourth consecutive month--down 0.4 percent in March. The index for beef increased 0.3 percent in March as beef prices registered their first increase since September. This increase was more than offset by price declines for pork, for poultry, for fish, and for eggs. The index for nonalcoholic beverages decreased 0.3 percent. On the other hand, the other three major groups--dairy and related products, cereal and bakery products, and other food at home--increased 0.5, 0.4 and 0.3 percent, respectively. The other two components of the food and beverage index-- food away from home and alcoholic beverages--rose 0.2 and declined 0.1 percent, respectively.

The housing component rose 0.2 percent in March, following increases of 0.1 percent in each of the first two months of the year. Shelter costs rose 0.2 percent. Within shelter, the index for rent rose 0.4 percent, owners' equivalent rent increased 0.2 percent, and the cost of lodging away from home decreased 0.4 percent. (Prior to seasonal adjustment, the latter index rose 1.7 percent.) The index for fuels and utilities, which registered declines in each of the three preceding months, increased 0.3 percent in March. The index for household fuels rose 0.4 percent; the index for natural gas increased 2.3 percent, the index for fuel oil was unchanged, and the index for electricity declined 0.5 percent. (Prior to seasonal adjustment, prices for fuel oil fell 1.5 percent and charges for natural gas and electricity declined 0.3 and 0.2 percent, respectively.) The index for household furnishings and operation increased 0.1 percent in March.

The transportation component declined for the fifth consecutive month, down 0.6 percent in March. For the third consecutive month, a sharp drop in the index for motor fuels more than offset a large increase in the index for airline fares. The index for gasoline fell 3.5 percent in March and has declined 14.0 percent in the last six months. As of March, gasoline prices were 24.0 percent lower than their peak level of November 1990. The index for new and used vehicle prices declined 0.2 percent; a decline of 1.5 percent in used car and truck prices more than offset a 0.1 percent rise in the index for new vehicles. Public transportation costs rose 0.4 percent in March. The index for airline fares increased substantially for the third consecutive month, up 2.0 percent in March, following increases of 2.7 and 3.2 percent in January and February, respectively.

The index for apparel declined 0.2 percent in March, following a 0.2 percent increase in February. (Prior to seasonal adjustment, apparel prices rose 2.3 percent, reflecting the introduction of higher priced spring-summer wear.)

Medical care costs rose 0.3 percent in March to a level 2.7 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 0.3 percent. Charges for professional services and for hospital and related services increased 0.4 and 0.2 percent, respectively.

Recreation costs rose 0.4 percent in March, following increases of 0.3 percent in both January and February. Recreational services costs rose 0.9 percent, reflecting increases of 1.2 percent in the index for admissions to movies, theaters, and concerts and 0.9 percent in the index for club membership dues and fees for participant sports.

The index for education and communication increased 0.3 percent in March after declining 0.1 percent in February, reflecting an upturn in the index for communication costs. Within the communication category, increases in local and long distance telephone charges--up 0.7 and 0.2 percent, respectively--more than offset declines in the indexes for personal computers and peripheral equipment and for cellular telephone services--down 2.8 and 0.7 percent, respectively.

The index for other goods and services declined 0.3 percent in March, following a 0.8 percent rise in February. The index for tobacco and smoking products, which rose 2.9 percent in February, declined 2.6 percent in March.

CPI for Urban Wage Earners and Clerical Workers (CPI-W)

On a seasonally adjusted basis, the CPI for Urban Wage Earners and Clerical Workers declined 0.1 percent in March.

Consumer Price Index data for April are scheduled for release on Thursday, May 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 February to March, the Old Series CPI-U and the Old Series CPI-W each rose 0.1 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 were taken in order to ameliorate the effects of these changes. Beginning with the release of the January 1997 index, data series that were to be changed or dropped from publication have been footnoted in all BLS published tables. This provided an early warning for 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 formerly 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 remained 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 former 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 former 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.