October 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) rose 0.2 percent in October, before seasonal adjustment, to a level of 168.2 (1982- 84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in October, the CPI-U increased 2.6 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 0.2 in October, prior to seasonal adjustment. The October level of 165.0 was 2.7 percent higher than the index in October 1998.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.2 percent in October, following a 0.4 percent increase in September. The energy index, which increased sharply in each of the preceding three months, declined 0.1 percent in October. The index for petroleum-based energy fell 0.2 percent, while the index for energy services was unchanged. For the fourth consecutive month in October, the food index increased 0.2 percent. Excluding food and energy, the CPI-U rose 0.2 percent in October, following an increase of 0.3 percent in September. Smaller increases in the indexes for apparel and shelter, coupled with a downturn in the index for cigarettes, were largely responsible for the deceleration in the October all items less food and energy index.

See page 4 for a note on the use of hedonic models to adjust prices of audio and video products in the CPI for changes in quality.

During the first 10 months of 1999, the CPI-U rose at a 2.8 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 1.6 percent for all of 1998. The energy index, which declined 8.8 percent in 1998, has risen at a 14.2 percent SAAR thus far in 1999. In the 10 months of 1999, petroleum-based energy costs increased at a 30.9 percent SAAR, and charges for energy services rose at a 2.0 percent annual rate. The food index has risen at a 2.1 percent SAAR thus far in 1999, following a 2.3 percent increase for all of 1998. Excluding food and energy, the CPI- U has advanced at a 1.9 percent rate thus far in 1998, compared with a 2.4 percent rise for all of 1998.

The index for food and beverages rose 0.2 percent in October. The index for food at home also increased 0.2 percent, following a 0.3 percent rise in September. Declines in the indexes for fruits and vegetables, for meats, poultry, fish, and eggs, and for other food at home partially offset a sharp increase in prices for dairy and related products. The index for dairy products, which rose 1.4 percent in September, advanced 3.4 percent in October, the largest rise in this component since a 5.4 percent rise in October 1973. Also contributing to the October advance were small increases in the indexes for cereal and bakery products and for nonalcoholic beverages--up 0.1 and 0.3 percent, respectively. The index for fruits and vegetables declined 0.6 percent in October. Within the fruits and vegetables group, the index for fresh vegetables decreased 2.1 percent, while the index for fresh fruits was virtually unchanged. (Prior to seasonal adjustment, fresh vegetable prices rose 0.4 percent, while fresh fruit prices declined 1.3 percent.) The index for processed fruits and vegetables rose 0.9 percent. The index for meats, poultry, fish, and eggs declined 0.1 percent. Within the latter group, the index for beef increased substantially for the second consecutive month--up 0.8 percent in October. Prices for pork and poultry each turned down in October and the index for eggs declined 6.9 percent. The index for other food at home declined 0.3 percent. The other two components of the food and beverages index--food away from home and alcoholic beverages--increased 0.2 and declined 0.2 percent, respectively.

The index for housing rose 0.1 percent in October, following an increase of 0.4 percent in September. Each of the three major housing groups--shelter, fuel and utilities, and household furnishings and operations--contributed to the moderation. Shelter costs, which increased 0.3 percent in September, rose 0.1 percent in October. Within shelter, the indexes for rent and for owners' equivalent rent each increased 0.2 percent, while the index for lodging away from home declined 0.6 percent. The index for fuels and utilities increased 0.2 percent in October, following a 0.9 percent rise in September. The index for natural gas, which rose 2.7 percent in September, fell 1.4 percent in October, partially offsetting increases in the indexes for fuel oil and electricity- -up 2.2 and 0.6 percent, respectively. The index for household furnishings and operations, which rose 0.1 percent in September, declined 0.2 percent in October.

The transportation component increased 0.2 percent in October, following a 0.6 percent rise in September, largely reflecting a downturn in the index for motor fuel. The gasoline index, which increased 2.6 percent in September, declined 0.4 percent in October. The index for new and used vehicles also decelerated, increasing 0.1 percent, following a 0.5 percent advance in September. The index for new vehicles rose 0.1 percent in October. (Prior to seasonal adjustment, new vehicle prices rose 0.5 percent. As of October, about 37 percent of the new vehicle sample was represented by 2000 models. The 2000 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 changes for the 2000 vehicles represented in the Producer Price Index sample, see news release USDL-99-324, dated November 10, 1999.) The index for used cars and trucks also moderated, increasing 0.4 percent in October after advancing 1.2 percent in September. The index for public transportation, however, turned up in October, following declines in each of the preceding two months. Airline fares, which had declined 2.7 and 1.7 percent in August and September, respectively, rose 5.3 percent in October.

The index for apparel, which rose 1.2 percent in September, increased 0.6 percent in October. (Prior to seasonal adjustment, apparel prices rose 2.1 percent, reflecting the continued introduction of higher priced fall-winter wear.)

Medical care costs rose 0.2 percent in October to a level 3.5 percent above a year ago. The index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--increased 0.1 percent, with the index for prescription drugs up 0.4 percent. The index for medical care services rose 0.2 percent. Charges for professional services and for hospital and related services increased 0.2 and 0.3 percent, respectively.

The index for recreation costs increased 0.1 percent in October, following a 0.5 percent decline in September. The index for admissions to movies, theaters, concerts, and sporting events, which declined 0.3 percent in September, turned up in October, increasing 0.7 percent. Decreases in the indexes for sporting goods and for toys--down 0.7 and 0.4 percent, respectively--partially offset that advance.

The index for education and communication, which was unchanged in September, increased 0.2 percent in October. Educational costs rose 0.4 percent, while the index for communication was unchanged. Within the latter group, an increase of 0.2 percent in the index for telephone services was offset by a 2.0 percent decline in the index for information processing other than telephone services; prices for personal computers and peripheral equipment declined 3.0 percent.

The index for other goods and services increased 0.1 percent in October after advancing 1.9 percent in September. Cigarette prices, which rose 7.1 percent in September, declined 0.3 percent in October. Prices for tobacco products other than cigarettes, however, rose 1.1 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 0.1 percent in October.

Consumer Price Index data for November are scheduled for release on Tuesday, December 14, 1999, at 8:30 A.M. (EST).

Extending the use of hedonic models to adjust prices for Audio and Video Products in the Consumer Price Index for changes in quality

Effective with the release of the Consumer Price Index (CPI) for January 2000, the Bureau of Labor Statistics (BLS) will extend hedonic quality adjustment to items in two CPI strata: Audio equipment and Other video equipment (which contains video equipment other than televisions). A hedonic model decomposes the price of a consumer product into implicit prices for each of its important features and components, thereby providing an estimate of the value of each feature and component. The following table gives the relative importance (share of weight), as of December 1998, of these strata in the Consumer Price Index for all Urban Consumers (the CPI-U) and in the Consumer Price Index for Urban Wage Earners and Clerical Workers (the CPI-W).

There are 12 main audio products in Audio equipment: (1) portable CD players, (2) table CD players, (3) radios, (4) tape recorders, (5) portable radio cassette players, (6) headset stereos, (7) receivers, (8) cassette decks, (9) stereo main speakers, (10) surround speakers, (11) rack systems, and (12) shelf systems. These items account for about 80 percent of the weight of Audio equipment in the CPI-U and 81 percent in the CPI-W. The hedonic models estimated for these products rely on home and portable audio products data that BLS purchased from a secondary source. Items in this index stratum that will not be subject to hedonic quality adjustment at this time are automotive audio equipment and audio accessories and miscellaneous equipment; the data source did not cover them. Detailed information on the work on Audio products is in a paper by Kokoski, Waehrer and Rozaklis available from the BLS. /1 The CPI also will use hedonic quality adjustment for video cameras, which have an estimated 31 percent of the weight within Other video equipment. (Items in this stratum that will not be subject to hedonic quality adjustment at this time include video cassette recorders, digital versatile disc players, satellite dishes and miscellaneous video equipment.) The hedonic models that BLS analysts developed for video cameras use observations collected for the CPI supplemented with additional observations that the BLS collected specifically for this purpose. A paper on this work is in preparation and will be available before the release of the January 2000 CPI. Additional work on hedonic quality adjustment is underway at BLS. In the future we plan to extend this method to additional CPI items as satisfactory estimates of hedonic models are developed. We will give CPI users notice three months before the first use of each additional model and will have a detailed paper reporting on each model available by the time of its implementation.

or telephone or send electronic mail to Paul Liegey at (202) 691-5394, Liegey_P@bls.gov.

1/ Kokoski, Mary, Keith Waehrer, and Patricia Rozaklis, "Using Hedonic Methods for Quality Adjustment in the CPI: The Consumer Audio Products Component", paper presented at the Conference on the Measurement of Inflation, Cardiff, Wales, September 1, 1999.

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.