May 1999 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) was unchanged in May, before seasonal adjustment, remaining at a level of 166.2 (1982-84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in May, 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 May, prior to seasonal adjustment. The May level of 162.8 was 2.1 percent higher than the index in May 1998.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U was unchanged in May, following a 0.7 percent rise in April. Energy costs declined 1.3 percent in May, reflecting a sharp turnaround in the index for gasoline. After advancing a record 15.0 percent in April and accounting for more than half of the overall April CPI rise, the index for gasoline declined 2.7 percent in May. The index for energy services fell 0.3 percent. The food index, which increased 0.1 percent in April, rose 0.4 percent in May. The index for food at home increased 0.6 percent, largely as a result of an upturn in the index for dairy products and a larger increase in the index for fruits and vegetables. Excluding food and energy, the CPI-U increased 0.1 percent in May, following a 0.4 percent rise in April. The deceleration in May reflects downturns in the indexes for apparel, for tobacco and smoking products, and for airline fares, coupled with a smaller increase in shelter costs.

During the first five months of 1999, the CPI-U rose at a 2.6 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 1.6 percent for all of 1998. The index for energy, which acted as a moderating influence on overall consumer price index movements in 1998 (down 8.8 percent), turned up sharply during the first five months of 1999, increasing at a 15.4 percent annual rate. Food costs, which rose 2.3 percent in 1998, have increased at a 2.1 percent SAAR thus far in 1999. Excluding food and energy, the CPI-U has advanced at a 1.8 percent rate thus far in 1999, compared with a 2.4 percent rise for all of 1998. The more moderate rate of advance this year is largely due to smaller increases in the indexes for shelter and for tobacco and smoking products.

The food and beverages index rose 0.4 percent in May. The index for food at home increased 0.6 percent in May, following a 0.1 percent rise in April. An upturn in the index for dairy products and a larger increase in the index for fruits and vegetables were responsible for the acceleration in the food at home index. The index for dairy products, which fell 3.3 percent in April, rose 0.1 percent in May, reflecting increases in the prices for milk and cheese. The index for fruits and vegetables, which increased 1.4 percent in April, advanced 2.6 percent in May. The index for fresh fruits rose 1.5 percent, reflecting large price increases for citrus fruits. Fresh vegetable prices, which generally decline at this time of year, rose slightly, resulting in a 4.9 percent increase in this index. Prices for processed fruits and vegetables increased 1.4 percent. The index for meats, poultry, fish, and eggs rose 0.2 percent in May, as a 1.5 percent increase in the index for pork was largely offset by a 1.2 percent decrease in poultry prices; the index for beef rose 0.2 percent. Among the other major grocery store food groups, the indexes for nonalcoholic beverages, for cereal and bakery products, and for other food at home rose 0.4, 0.3, and 0.1 percent, respectively. The other two components of the food and beverages index--food away from home and alcoholic beverages--rose 0.1 and 0.3 percent, respectively.

The housing component rose 0.1 percent in May. Shelter costs, which increased 0.4 percent in April, advanced 0.2 percent in May. Within shelter, the index for rent increased 0.2 percent; owners' equivalent rent rose 0.3 percent, while the cost of lodging away from home decreased 0.2 percent. (Prior to seasonal adjustment, the cost of lodging while away from home fell 2.4 percent in May.) The index for fuels and utilities declined 0.2 percent in May. The index for household fuels decreased 0.3 percent, as declines in the indexes for natural gas and for electricity-- down 0.4 and 0.3 percent, respectively--more than offset a 0.9 percent increase in the index for fuel oil. (Prior to seasonal adjustment, charges for natural gas and electricity rose 0.5 and 0.8 percent, respectively.) The index for household furnishings and operations decreased 0.3 percent in May.

The transportation component, which rose 2.4 percent in April, declined 0.5 percent in May, reflecting downturns in the indexes for gasoline and airline fares. The gasoline index, which rose 15.0 percent in April, declined 2.7 percent in May. (Prior to seasonal adjustment, gasoline prices increased 0.4 percent.) Airline fares declined 2.5 percent in May, following five consecutive monthly increases, totaling 12.5 percent. The index for new and used vehicles rose 0.2 percent in May, the same as in April. The index for new vehicles fell 0.1 percent, while the index for used cars and trucks increased 0.9 percent in May.

The index for apparel, which rose 1.5 percent in April, declined 0.2 percent in May. (Prior to seasonal adjustment, apparel prices fell 0.7 percent, reflecting seasonal discounting on women's and girl's wear.)

Medical care costs rose 0.2 percent in May to a level 3.4 percent above a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--increased 0.1 percent. The index for medical care services rose 0.3 percent. Charges for professional services and for hospital and related services increased 0.2 and 0.4 percent, respectively.

The index for recreation costs increased 0.2 percent in May. A 1.3 percent increase in the index for admissions to movies, theaters, concerts, and sporting events more than offset small decreases in most recreational goods.

The index for education and communication declined 0.1 percent in May. Educational costs rose 0.5 percent, while the index for communication declined 0.6 percent. Within the latter group, the indexes for personal computers and peripheral equipment and for telephone services declined 1.9 and 0.4 percent, respectively. Decreases of 2.3 percent in both long distance telephone charges and the cost of cellular telephone services more than offset a 1.8 percent increase in local telephone service charges.

The index for other goods and services decreased 0.2 percent, following a 1.0 percent increase in April. The index for tobacco and smoking products, which rose 3.6 percent in April, declined 1.4 percent in May. The recent movements in tobacco prices largely reflect variations in the discounting of some major cigarette brands.

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 May.

Consumer Price Index data for June are scheduled for release on Thursday, July 15, 1999, at 8:30 A.M. (EDT).

CPI (Old Series)

For the first six months of 1999, BLS will also publish Old Series CPI-U and Old Series CPI-W based on the former method of calculating the elementary aggregates, that is, employing an arithmetic mean in all index categories. These old series data are contained in tables 1 (LAS)-4 (LAS). From April to May, the Old Series CPI-U and the Old Series CPI-W were unchanged and rose 0.1 percent, respectively; these series are not seasonally adjusted. (The unadjusted CPI-U and CPI-W using the new method of calculating the elementary aggregates also were unchanged and rose 0.1 percent, respectively, in May.)

Consumer Price Index Formula Changed

On April 16, 1998, the Bureau of Labor Statistics announced its decision to use a new formula for calculating the basic components of the Consumer Price Index for all Urban Consumers (CPI-U) and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This change is effective with data for January 1999.

The new formula, the geometric mean estimator, will be used in index categories that comprise approximately 61 percent of total consumer spending represented by the CPI-U. The remaining index categories, which are shown in the table below, will continue to be calculated as they have been. Based upon BLS research, it is expected that planned use of the new formula will reduce the annual rate of increase in the CPI by approximately 0.2 percentage point per year.

The geometric mean estimator has been introduced in both the CPI-U and the CPI-W effective with data for January 1999, in accord with the past practice of introducing methodological changes at the beginning of a calendar year. BLS will continue to publish "overlap" CPI-U and CPI-W series using the former calculation method for the first six months of 1999. These indexes will not be published regularly for months subsequent to June 1999, but will be available upon request.

Additional information on this change was published in the April 1998 CPI Detailed Report and is available on the Internet (http://stats.bls.gov/cpihome.htm). This information also may be obtained by writing to the Bureau of Labor Statistics, Division of Consumer Prices and Price Indexes, 2 Massachusetts Ave., N.E., Room 3615, Washington, D.C. 20212 or by calling (202) 606-7000.

Arithmetic Mean (Laspeyres) Formula

1. Selected shelter services:

A) Rent of primary B) Owners' equivalent C) Housing at school, residence rent of primary excluding board residence

2. Selected utilities and government charges:

A) Electricity C) Residential water and E) Telephone services, sewerage maintenance local charges

B) Utility natural gas D) State and local F) Cable television service registration, license, and motor vehicle property tax

3. Selected medical care services:

A) Physicians' services C) Eyeglasses and eye E) Hospital services care

B) Dental services D) Services by other F) Nursing homes and medical professionals adult daycare

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 1994 through 1998 were replaced at the end of 1998. 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 wholesale tobacco prices and legal fees passed on to consumers. 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. The procedure was used to account for unusual butter fat supply reductions affecting the Fats and oils series. 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 or sending e-mail to Gallagher_C@BLS.GOV.