March 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 0.8 percent in March, before seasonal adjustment, to a level of 171.1 (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 increased 3.7 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) also rose 0.8 percent in March, prior to seasonal adjustment. The March level of 167.8 was 4.0 percent higher than the index in March 1999.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.7 percent in March, following an increase of 0.5 percent in February. Rising energy costs--up 4.9 percent in March--accounted for more than half of the monthly change in the overall CPI for the second consecutive month. The index for petroleum-based energy increased 9.1 percent, and the index for energy services rose 0.5 percent. The food index, which increased 0.4 percent in February, rose 0.1 percent in March. Excluding food and energy, the CPI-U rose 0.4 percent in March, following increases of 0.2 percent in the first two months of this year. Most major expenditure groups contributed to the larger March advance with increases in the cost of shelter, transportation (other than motor fuels), and household furnishings and operations accounting for about three-fourths of the acceleration.

See page 5 for a note on the use of hedonic models to adjust prices of audio and video products in the CPI for changes in quality.

For the first three months of 2000, the CPI-U advanced at a 5.8 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.7 percent in all of 1999. The energy index, which increased 13.4 percent in 1999, accelerated during the first three months of 2000, advancing at a 50.5 percent SAAR. Petroleum-based energy costs rose at a 107.9 percent SAAR, and charges for energy services increased at a 6.8 percent annual rate. The food index, which rose 1.9 percent in all of 1999, has increased at a 1.7 percent SAAR thus far in 2000. Grocery store food prices increased at a 1.2 percent SAAR in the first three months: The index for meats, poultry, fish, and eggs advanced at a 9.2 percent SAAR, while the indexes for fruits and vegetables and for dairy products declined at SAARs of 7.9 and 7.2 percent, respectively.

The CPI-U excluding food and energy advanced at a 3.2 percent SAAR in the first 3 months of 2000, following a 1.9 percent rise for all of 1999. The acceleration in the first quarter largely reflects rising service costs, as the index for services less energy services rose at a 4.1 percent SAAR after advancing 2.7 percent in all of 1999. In particular, rising costs for shelter, for public transportation, and for medical care services contributed to the acceleration. The index for commodities less food and energy commodities rose at a 0.3 percent SAAR in the first three months of 2000 after increasing 0.2 percent in all of 1999. The rates for selected groups for the last five and one-quarter years are shown below.

The food and beverages index advanced 0.1 percent in March. The index for food at home rose 0.1 percent in March, following a 0.5 percent increase in February. The indexes for fruits and vegetables and for dairy products, each of which increased in February, declined in March--down 1.7 and 1.1 percent, respectively. Within the fruits and vegetables group, the index for fresh fruits fell 2.3 percent, while the index for fresh vegetables declined 1.9 percent. (Prior to seasonal adjustment, fresh vegetable prices increased 0. 5 percent.) Prices for processed fruits and vegetables fell 0.2 percent. The index for meats, poultry, fish, and eggs increased 0.9 percent in March, the same as in February. The indexes for beef and pork rose 0.9 and 2.4 percent, respectively, in March and have advanced 6.4 and 7.5 percent in the last 12 months. Poultry prices increased 0.4 percent in March. Among the other major grocery store food groups, the index for cereal and bakery products increased 0.3 percent; the index for other food at home, 0.6 percent; and the index for nonalcoholic beverages, 0.1 percent. The other two components of the food and beverages index--food away from home and alcoholic beverages-- increased 0.2 and 0.3 percent, respectively.

The index for housing, which increased 0.5 percent in February, rose 0.4 percent in March. Shelter costs increased 0.5 percent, following increases of 0.3 percent in the first two months of the year. Within shelter, the indexes for rent and for owners' equivalent rent each increased 0.3 percent for the third month in a row. The index for lodging away from home, however, rose 3.2 percent in March after declining 0.3 percent in February. (Prior to seasonal adjustment, the index for lodging away from home rose 5.0 percent in March and has increased 14.3 percent in the first three months of the year.) The index for fuels and utilities, which advanced 2.6 percent in February, declined 0.4 percent in March. The index for fuel oil declined 14.2 percent in March, following a record 34.6 percent increase in February. The index for electricity also turned down in March, declining 0.2 percent after increasing 0.8 percent in the preceding month. The index for natural gas rose substantially for the third consecutive month--up 1.9 percent in March, following increases of 1.4 and 1.7 percent in January and February, respectively. The index for household furnishings and operations, which was unchanged in February, increased 0.5 percent in March.

The transportation component rose 2.5 percent in March, following a 1.3 percent increase in February. More than four-fifths of the March transportation advance was due to the continued rise in gasoline prices. In March, the index for gasoline registered its largest monthly advance since April 1999--up 11.1 percent--bringing its increase over the last 12 months to 52.6 percent. As of March, the index for gasoline was 10.2 percent higher than its previous peak level of November 1990. The index for new vehicles registered its first increase since September, advancing 0.1 percent in March. The index for used cars and trucks was unchanged, following declines in each of the preceding four months. The index for public transportation rose 2.7 percent, largely as a result of a 4.6 percent rise in airline fares.

The index for apparel increased 0.3 percent, following a 0.2 percent rise in February. (Prior to seasonal adjustment, apparel prices rose 2.6 percent, reflecting the further introduction of higher-priced spring summer wear.)

Medical care costs rose 0.5 percent in March to a level 3.9 percent higher than a year ago. In March, the index for medical care commodities- -prescription drugs, nonprescription drugs, and medical supplies--rose 0.3 percent. The index for medical care services rose 0.5 percent in March. Charges for professional services and for hospital and related services increased 0.4 and 0.5 percent, respectively.

The index for recreation costs, which was unchanged in February, increased 0.4 percent in March. Upturns in the indexes for admissions to movies, theaters, concerts, and sporting events, for video and audio, and for sporting goods; coupled with a larger increase in the index for club membership dues and fees for participant sports, were principally responsible for the March advance.

The index for education and communication, which declined 0.5 percent in February, was unchanged in March. Educational costs rose 0.4 percent, reflecting a 0.7 percent increase in the index for child care and nursery school. The index for communication declined 0.4 percent, reflecting decreases in the indexes for telephone services and for personal computers and peripheral equipment--down 0.5 and 2.0 percent, respectively.

The index for other goods and services advanced 0.5 percent in March after increasing 0.8 percent in February. The index for cigarettes increased 1.1 percent in March, reflecting in part a 55 cent-a-pack tax increase in the state of New York. The cigarette increase accounted for about 60 percent of the March rise in the other goods and services component.

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 0.7 percent in March.

Consumer Price Index data for April are scheduled for release on Tuesday, May 16, 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.