January 2000 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) increased 0.2 percent in January, before seasonal adjustment, to a level of 168.7 (1982-84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in January, the CPI-U increased 2.7 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) also rose 0.2 percent in January, prior to seasonal adjustment. The January level of 165.5 was 2.8 percent higher than the index in January 1999.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.2 percent in January, the same as in each of the preceding three months. The food index declined 0.1 percent in January after registering small increases throughout most of 1999. The energy index continued to advance, up 1.0 percent in January. The index for petroleum-based energy increased 1.9 percent and the index for energy services rose 0.1 percent. Excluding food and energy, the CPI-U rose 0.2 percent in January, following an increase of 0.1 percent in December. The January advance reflects larger increases in shelter costs and educational books, coupled with an upturn in the price of cigarettes.

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.

The food and beverages index was unchanged in January. The index for food at home declined 0.2 percent, reflecting decreases in the indexes for fruits and vegetables, for dairy products, and for cereal and bakery products. The index for fruits and vegetables, which increased 0.4 percent in December, declined 1.1 percent in January. Within the fruits and vegetables group, the indexes for fresh fruits and for fresh vegetables declined 1.1 and 2.8 percent, respectively. (Prior to seasonal adjustment, fresh vegetable prices rose 4.2 percent.) Prices for processed fruits and vegetables rose 1.9 percent, following declines in each of the preceding two months. The index for dairy products registered its second consecutive decline--down 1.0 percent in January--largely as a result of a 2.6 percent decrease in the price of milk. The index for cereal and bakery products fell 0.5 percent, reflecting a decline in prices for breakfast cereal. On the other hand, the indexes for nonalcoholic beverages and for meats, poultry, fish, and eggs increased 0.7 and 0.3 percent, respectively, while the index for other food at home was unchanged. Increases in prices for coffee and carbonated beverages were responsible for the increase in the index for nonalcoholic beverages. Within the index for meats, poultry, fish, and eggs, increases in prices for poultry and eggs more than offset a decline in meat prices. The other two components of the food and beverages index--food away from home and alcoholic beverages--each increased 0.2 percent.

The index for housing rose 0.3 percent in January, following an increase of 0.1 percent in December. Each of the three major housing groups--shelter, fuels and utilities, and household furnishings and operations--contributed to the acceleration. Shelter costs, which increased 0.1 percent in December, advanced 0.3 percent in January. Within shelter, the indexes for rent and for owners' equivalent rent each increased 0.3 percent, and the index for lodging away from home rose 0.6 percent. The index for fuels and utilities turned up in January, advancing 0.5 percent after registering a 0.5 percent decrease in December. The index for natural gas, which declined 4.0 percent in December, increased 1.4 percent in January. This upturn more than offset a downturn in the index for electricity--down 0.4 percent in January after increasing 0.2 percent in December. Fuel oil prices, which increased 30.9 percent in all of 1999, continued upwards in January, advancing 7.9 percent. The index for household furnishings and operations increased 0.3 percent in January, following a 0.1 percent rise in December.

The transportation component rose 0.1 percent in January after increasing 0.8 percent in December. Gasoline prices continued to advance, but by less than in December. The index for gasoline increased 1.6 percent in January, bringing the increase over the last 12 months to 32.4 percent. The index for new vehicles, which was unchanged in December, declined 0.3 percent in January. (As of January, about 82 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 declined for the third consecutive month--down 0.7 percent in January. The index for public transportation declined 0.8 percent, largely as a result of a 1.4 percent drop in airline fares.

The index for apparel decreased 1.1 percent in January after registering no change in December. (Prior to seasonal adjustment, apparel prices fell 2.5 percent, reflecting post-holiday discounting.)

Medical care costs rose 0.3 percent in January to a level 3.6 percent higher than a year ago. In January, the index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--increased 0.3 percent. The index for medical care services also rose 0.3 percent in January. Charges for physicians' services and for hospital and related services increased 0.5 and 0.3 percent, respectively.

The index for recreation costs increased 0.2 percent in January, the same as in each of the preceding two months. Most recreation categories registered small price increases in January; an exception was the index for photography, which declined 0.8 percent.

The index for education and communication increased 0.5 percent in January. Educational costs rose 0.8 percent, reflecting a 6.0 percent increase in educational books and supplies. The index for communication advanced 0.1 percent; a 0.5 percent increase in charges for local telephone services more than offset a 1.7 percent decrease in the index for personal computers and peripheral equipment.

The index for other goods and services advanced 0.6 percent in January, after registering no change in December. The index for cigarettes, which declined in each of the preceding three months, increased 1.7 percent in January, reflecting in part a 13-cents-a-pack increase in the wholesale price introduced in mid-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 rose 0.2 percent in January.

Consumer Price Index data for February are scheduled for release on Friday, March 17, 2000, at 8:30 A.M. (EST).

Extending the use of hedonic models to adjust prices for changes in quality

As previously announced, the Bureau of Labor Statistics (BLS) is extending the use in the Consumer Price Index (CPI) of quality adjustments derived from hedonic models. 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. We plan to extend this method to additional items in the CPI. As we do so, we will give CPI users notice at least three months before the first use of hedonic quality adjustment for each additional item and will have detailed background papers on the models to be employed available by the time of first use.

As first announced at the time of the October 1999 CPI release, hedonic quality adjustments for 12 audio products and for video cameras are being incorporated into the index effective with the January 2000 CPI. Audio products are in the Audio equipment item stratum and video cameras are in Other video equipment, which contains video equipment other than televisions. Papers describing these adjustments are on the CPI web site (http://stats.bls.gov/cpihome.htm).

Effective with the CPI for April 2000, BLS will extend hedonic quality adjustment to Video Cassette Recorders (VCRs) and Digital Versatile Disc (DVD) players, two other items in the Other video equipment item stratum. The relative importance (share of weight), as of December 1999, of this stratum was 0.062 percent in the CPI for all Urban Consumers (CPI-U) and 0.071 percent in the CPI for Urban Wage Earners and Clerical Workers (CPI- W). Within Other video equipment, VCRs are estimated to represent 46 percent of the weight and DVD players about 6 percent. Camcorders represent about 30 percent. The remaining items in this stratum--those that will not be subject to hedonic quality adjustment at this time-- include satellite dishes and some miscellaneous video equipment.

The hedonic models that BLS analysts developed for VCRs and for DVD players use observations collected for the CPI, supplemented with additional observations collected specifically for this purpose. Papers describing this work are in preparation and will be available before release of the April 2000 CPI. Additional work on hedonic quality adjustment for telephones, microwave ovens, refrigerator/freezers, and washers and dryers is underway at BLS.

or contact Paul Liegey either by telephone (202) 691-5394 or by electronic mail (Liegey_P@bls.gov).

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 1995 through 1999 were replaced at the end of 1999. 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 the breakfast cereal index, the procedure was used to offset the effects of price-cutting among cereal manufacturers. For the educational books and supplies index, the procedure was used to account for greater than normal sale prices on educational reference books. For some alcoholic beverage series, Intervention Analysis Seasonal Adjustment was used to offset the effects of increased brewer's costs along with increased demand for specialty beers. 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 fats and oils series, the procedure was used to account for lower domestic butter stocks, lower cold storage supplies, and anticipation of a bumper soybean crop. For the new trucks index, the procedure was applied to account for loyalty rebates offered to customers by American automakers. 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) 691-6968 or sending e-mail to Gallagher_C@BLS.GOV.