February 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 0.6 percent in February, before seasonal adjustment, to a level of 169.7 (1982-84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in February, the CPI- U increased 3.2 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 0.5 percent in February, prior to seasonal adjustment. The February level of 166.4 was 3.3 percent higher than the index in February 1999.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.5 percent in February, following increases of 0.2 percent in each of the preceding four months. The food index, which declined 0.1 percent in January, increased 0.4 percent in February, reflecting in part a sharp jump in meat prices. The energy index rose 4.6 percent, its largest advance since a 6.0 percent rise in April 1999. The index for petroleum-based energy increased 8.0 percent and the index for energy services rose 1.1 percent. Excluding food and energy, the CPI-U rose 0.2 percent in February, the same as in January.

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 advanced 0.4 percent in February. The index for food at home, which declined 0.2 percent in January, rose 0.5 percent in February, primarily as a result of a 1.4 percent rise in the index for meats and an upturn in the index for fruits and vegetables. The index for fruits and vegetables, which declined 1.1 percent in January, increased 0.7 percent in February. Within the fruits and vegetables group, the index for fresh fruits rose 2.7 percent, while the index for fresh vegetables declined 1.0 percent. (Prior to seasonal adjustment, fresh fruit and fresh vegetable prices declined 1.4 and 5.4 percent, respectively.) Prices for processed fruits and vegetables fell 0.2 percent. The index for meats, poultry, fish, and eggs increased 0.9 percent as price increases for meats and for fish and seafood were partially offset by declines in prices for poultry and for eggs. The indexes for beef and pork rose 1.1 and 2.1 percent, respectively, while poultry prices fell 1.3 percent. Among the other major grocery store food groups, the indexes for dairy products and cereal and bakery products each turned up in February, increasing 0.3 percent and 0.1 percent, respectively. The index for nonalcoholic beverages rose 0.4 percent, while the index for other food at home was unchanged for the second consecutive month. 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, which rose 0.3 percent in January, increased 0.5 percent in February as a result of a sharp rise in household fuel costs. The index for fuels and utilities advanced 2.6 percent in February after increasing 0.5 percent in January. Each of the three major household fuels contributed to the acceleration in February. The index for fuel oil rose 34.6 percent, its largest monthly increase on record. The index for natural gas, which increased 1.4 percent in January, advanced 1.7 percent in February. The index for electricity rose 0.8 percent, following a 0.4 percent decline in January. Shelter costs increased 0.3 percent in February, the same as in the preceding month. Within shelter, the indexes for rent and for owners' equivalent rent each increased 0.3 percent, while the index for lodging away from home declined 0.3 percent. (Prior to seasonal adjustment, the index for lodging away from home rose 3.4 percent.) The index for household furnishings and operations was unchanged in February after advancing 0.3 percent in January.

The transportation component rose 1.3 percent in February after increasing 0.1 percent in January. In February, the index for gasoline registered its largest monthly advance since April 1999--up 6.3 percent-- bringing its increase over the last 12 months to 41.2 percent. As of February, the index for gasoline was 1.3 percent lower than its peak level in November 1990. The index for new vehicles declined 0.1 percent in February, following a 0.3 percent drop in January. The index for used cars and trucks declined for the fourth consecutive month--down 0.6 percent in February. The index for public transportation rose 2.4 percent, largely as a result of a 3.8 percent rise in airline fares.

The index for apparel increased 0.2 percent, following a decline of 1.1 percent in January. (Prior to seasonal adjustment, apparel prices rose 1.9 percent, reflecting the introduction of higher-priced spring summer wear.)

Medical care costs rose 0.4 percent in February to a level 3.8 percent higher than a year ago. In February, the index for medical care commodities--prescription drugs, nonprescription drugs, and medical supplies--was virtually unchanged. The index for medical care services rose 0.5 percent in February. Charges for professional services and for hospital and related services increased 0.6 and 0.5 percent, respectively.

The index for recreation costs was unchanged in February, following increases of 0.2 percent in each of the preceding three months. Declines in the indexes for video and audio, for sporting goods, for toys, and for recreation services helped to offset a 1.2 percent rise in the index for pets, pet products and services.

The index for education and communication, which increased 0.5 percent in January, declined 0.5 percent in February. Educational costs rose 0.5 percent, reflecting a 1.6 percent increase in educational books and supplies. The index for communication declined 1.4 percent, reflecting decreases in the indexes for telephone services and for personal computers and peripheral equipment--down 1.5 and 2.8 percent, respectively.

The index for other goods and services advanced 0.8 percent in February after increasing 0.6 percent in January. The index for cigarettes increased 2.2 percent in February, following a 1.7 percent rise in January. These increases largely reflect the pass-through to retail of 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 0.5 percent in February.

Consumer Price Index data for March are scheduled for release on Friday, April 14, 2000, at 8:30 A.M. (EDT).

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 were 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.