May 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 0.1 percent in May, before seasonal adjustment, to a level of 171.3 (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 3.1 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) also rose 0.1 percent in May, prior to seasonal adjustment. The May level of 168.1 was 3.3 percent higher than the index in May 1999.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.1 percent in May after registering no change in April. The energy index declined 1.9 percent in May, the same as in April. In May, the index for petroleum- based energy fell 3.4 percent, and the index for energy services declined 0.1 percent. The food index, which rose 0.1 percent in April, advanced 0.5 percent in May, its largest monthly increase since a 0.6 percent rise in October 1998. The index for food at home, which was unchanged in April, increased 0.7 percent in May with each of the major food at home groups except dairy products contributing to the acceleration. Excluding food and energy, the CPI-U rose 0.2 percent in May, the same as in April.

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

During the first five months of 2000, the CPI-U rose at a 3.6 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.7 percent for all of 1999. The index for energy, which turned up sharply in 1999--advancing 13.4 percent--accelerated further in the first five months of 2000, increasing at a 16.5 percent SAAR. Food costs, which rose 1.9 percent in all of 1999, have increased at a 2.5 percent SAAR thus far in 2000. Excluding food and energy, the CPI-U has advanced at a 2.7 percent rate thus far in 2000, compared with a 1.9 percent rise for all of 1999. Acceleration in the indexes for shelter, for airline fares, for medical care, and for tobacco and smoking products have contributed to the larger rate of advance thus far this year.

The food and beverages index advanced 0.5 percent in May. The index for food at home, which was unchanged in April, rose 0.7 percent in May. Each of the major food at home groups except dairy products contributed to the acceleration in May. The index for fruits and vegetables, which fell 0.4 percent in April, rose 1.6 percent in May. Within the fruits and vegetables group, increases in the indexes for fresh vegetables and for processed fruits and vegetables--up 5.8 and 1.3 percent, respectively-- more than offset a 2.1 percent decline in the index for fresh fruits. The index for meats, poultry, fish, and eggs advanced 0.8 percent in May after increasing 0.6 percent in April. In May, the indexes for beef, pork, and poultry rose 0.9, 0.4, and 0.7 percent, respectively. The index for cereal and bakery products increased 0.7 percent, following a 0.3 percent rise in April. The indexes for nonalcoholic beverages and other food at home, each of which declined in April, turned up in May. On the other hand, the index for dairy products declined 0.6 percent after increasing 0.9 percent in April. The other two components of the food and beverages index--food away from home and alcoholic beverages--increased 0.1 percent and were unchanged, respectively.

The index for housing increased 0.2 percent in May, following a 0.1 percent rise in April. Shelter costs, which rose 0.2 percent in April, increased 0.3 percent in May. Within shelter, the index for rent increased 0.3 percent; owners' equivalent rent rose 0.2 percent; and the index for lodging away from home advanced 0.7 percent. (Prior to seasonal adjustment, the index for lodging away from home fell 1.6 percent.) The index for fuels and utilities, which rose 0.2 percent in April, declined 0.1 percent in May. The index for fuel oil declined for the third consecutive month, down 1.0 percent in May. Despite the recent declines, fuel oil prices are 47.2 percent higher than a year ago. The index for natural gas rose for the fifth consecutive month--up 0.7 percent in May and 7.4 percent in the first five months of this year. The index for electricity declined 0.4 percent in May. (Prior to seasonal adjustment, charges for electricity rose 0.7 percent.) The index for household furnishings and operations rose 0.1 percent in May, the same as in April.

The transportation component declined for the second consecutive month--down 0.5 percent in May--reflecting another drop in gasoline prices. The index for gasoline declined 3.5 percent in May, following a 4.1 percent drop in April. Despite these recent declines, gasoline prices in May were 26.6 percent higher than a year ago. The index for new vehicles increased 0.2 percent in May after advancing 0.3 percent in April. (Prior to seasonal adjustment, new vehicle prices fell 0.1 percent.) The index for used cars and trucks rose 0.9 percent. Public transportation costs increased 0.6 percent, largely as a result of a 0.8 percent rise in airline fares.

The index for apparel declined 0.2 percent in May, following a 0.5 percent drop in April. (Prior to seasonal adjustment, apparel prices fell 0.8 percent, reflecting discounting of women's clothing.)

Medical care costs rose 0.3 percent in May and were 4.0 percent higher than a year ago. In May, the index for medical care commodities-- prescription drugs, and nonprescription drugs and medical supplies--rose 0.3 percent. The index for medical care services also rose 0.3 percent in May. Charges for professional services and for hospital and related services increased 0.2 and 0.4 percent, respectively.

The index for recreation costs, which was unchanged in April, increased 0.3 percent in May. The index for video and audio rose 1.2 percent in May, following a 0.5 percent decline in April.

The index for education and communication rose 0.1 percent, following two consecutive months of no change. Educational costs rose 0.4 percent in May, while the index for communication declined 0.1 percent. The latter decrease reflects declines in the indexes for telephone services and for personal computers and peripheral equipment--down 0.1 and 0.7 percent, respectively.

The index for other goods and services, which advanced 1.4 percent in April, declined 0.6 percent in May. Cigarette prices fell 2.8 percent in May, following a 4.7 percent rise in April.

CPI for Urban Wage Earners and Clerical Workers (CPI-W)

On a seasonally adjusted basis, the CPI for Urban Wage Earners and Clerical Workers increased 0.1 percent in May.

Consumer Price Index data for June are scheduled for release on Tuesday, July 18, 2000, at 8:30 A.M. (EDT).

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

The Bureau of Labor Statistics (BLS) is continuing to expand the use in the Consumer Price Index (CPI) of quality adjustments derived from hedonic models. As first announced at the time of the January 2000 CPI release, hedonic quality adjustments for Video Cassette Recorders and Digital Versatile Disc players were incorporated into the index effective with the April 2000 CPI. These items are in the Other video equipment item stratum, which contains video equipment other than televisions. Papers describing these adjustments are on the CPI's web site (http://stats.bls.gov/cpihome.htm). Effective with the CPI for July 2000, BLS will extend hedonic quality adjustment to Refrigerator/freezers and Microwave ovens, which are part of the Major appliances stratum, and to College textbooks, which are part of the Educational books and supplies stratum.

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 papers on the models to be employed available by the time of first use.

The relative importance (share of weight), as of December 1999, of the Major appliances stratum was 0.205 percent in the CPI for all Urban Consumers (CPI-U) and 0.236 percent in the CPI for Urban Wage Earners and Clerical Workers (CPI-W). Within Major appliances, Refrigerator/freezers are estimated to represent 33 percent of the weight and Microwave ovens about 11 percent. The remaining items in this stratum-those that will not be subject to hedonic quality adjustment at this time-include home freezers, washers and dryers, and conventional stoves and ovens. The December 1999 relative importance of the Educational books and supplies stratum was 0.196 percent in the CPI-U and 0.192 percent in the CPI-W. Within Educational books and supplies, College textbooks are estimated to represent 79 percent of the weight. The items in this stratum that will not be subject to hedonic quality adjustment at this time include Elementary and high school books and supplies and Encyclopedias and other reference books.

The hedonic models that BLS analysts developed for Refrigerator/freezers and Microwave ovens use observations collected for the CPI, supplemented with additional observations that the BLS collected specifically for this purpose. The College textbook work was accomplished using only observations collected for the CPI, without supplemental collected data. Papers describing this work are in preparation and will be available before release of the July 2000 CPI.

Additional work on hedonic quality adjustment for telephones and for washers and dryers is underway at BLS.

Bureau of Labor Statistics Division of Consumer Prices and Price Indexes 2 Massachusetts Ave. NE, Room 3260 Washington, DC 20212

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

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