June 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 June, before seasonal adjustment, to a level of 172.3 (1982- 84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in June, the CPI-U increased 3.7 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) also rose 0.6 percent in June, prior to seasonal adjustment. The June level of 169.1 was 3.9 percent higher than the index in June 1999.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.6 percent in June after increasing 0.1 percent in May. The energy index, which declined 1.9 percent in May, increased 5.6 percent in June, accounting for three- fourths of the overall CPI-U advance. The index for petroleum-based energy rose 8.1 percent, and the index for energy services increased 2.9 percent. The food index, which advanced 0.5 percent in May, increased 0.1 percent in June. The moderation was largely the result of downturns in the indexes for fruits and vegetables and for cereal and bakery products. Excluding food and energy, the CPI-U rose 0.2 percent in June, the same as in both April and May.

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

Consumer prices rose at a seasonally adjusted annual rate (SAAR) of 2.6 percent in the second quarter after advancing at a 5.8 percent rate in the first three months of 2000. This brings the year-to-date annual rate to 4.2 percent and compares with an increase of 2.7 percent for all of 1999. The acceleration in the overall CPI-U thus far in 2000 reflects an even sharper increase in energy prices than in 1999, coupled with slightly larger advances in the indexes for food and for all items less food and energy. The energy index, which rose 13.4 percent in 1999, has continued to accelerate this year, advancing at a 26.6 percent SAAR thus far in 2000. In the first half of 2000, petroleum-based energy costs increased at a 44.6 percent SAAR, and charges for energy services increased at a 10.2 percent annual rate. The food index rose at a 2.2 percent SAAR in the first 6 months of 2000, following an increase of 1.9 percent in all of 1999. Grocery store food prices also rose at a 2.2 percent SAAR in the first six months, with the largest increase among the six major grocery store food groups in the index for meats, poultry, fish, and eggs--up at a 8.5 percent rate.

The CPI-U excluding food and energy advanced at a 2.0 percent rate in the second quarter of 2000, following an increase at a 3.2 percent rate in the first three months of 2000. The advance at a 2.6 percent SAAR for the first half of 2000 compares with a 1.9 percent increase for all of 1999. This acceleration has been concentrated in the services components; the index for services less energy services increased 2.7 percent in all of 1999 and has risen at a 3.7 percent SAAR in the first 6 months of this year. Contributing to this acceleration were larger increases in the indexes for shelter, for medical care services, and for airline fares. The index for commodities less food and energy commodities rose 0.2 percent in all of 1999 and at a 0.1 percent SAAR in the first half of 2000. The rates for selected groups for the last five and one-half years are shown below.

The food and beverages index increased 0.1 percent in June. The index for food at home, which rose 0.7 percent in May, increased 0.1 percent in June. Most of the major food at home groups contributed to the deceleration in June. The index for fruits and vegetables, which rose 1.6 percent in May, decreased 0.7 percent in June. Within the fruits and vegetables group, a 2.8 percent decrease in the index for fresh fruits more than offset increases in the indexes for fresh vegetables and processed fruits and vegetables--up 1.0 and 0.2 percent, respectively. (Prior to seasonal adjustment, fresh vegetable prices fell 0.6 percent.) The indexes for cereal and bakery products and for dairy products also declined in June--down 0.7 and 0.1 percent, respectively. The index for meats, poultry, fish, and eggs rose 0.5 percent in June after increasing 0.8 percent in May. In June, the index for beef continued to advance--up 1.1 percent--while the indexes for pork and for poultry turned down. During the first 6 months of the year, beef prices have risen at a 10.8 percent SAAR, pork prices at an 11.0 percent SAAR, and poultry prices at a 2.3 percent SAAR. The indexes for nonalcoholic beverages and other food at home each increased 0.4 percent in June. The other two components of the food and beverages index--food away from home and alcoholic beverages- -increased 0.2 and 0.6 percent, respectively.

The index for housing increased 0.5 percent in June, following a 0.2 percent rise in May. The index for fuels and utilities, which declined 0.1 percent in May, advanced 2.2 percent in June. The index for natural gas rose a record 7.8 percent in June, its sixth consecutive monthly increase. During the first 6 months this year, this index has advanced at a 34.1 percent SAAR. The index for electricity increased 0.8 percent in June. (Prior to seasonal adjustment, charges for electricity rose 6.6 percent, reflecting the shift to seasonal rates in some areas.) The index for fuel oil turned up in June--advancing 1.1 percent--following declines in each of the three preceding months. Through the first six months of 2000, fuel oil prices have advanced at a 40.9 percent SAAR. Shelter costs, which rose 0.3 percent in May, increased 0.4 percent in June. Within shelter, the index for rent increased 0.2 percent; owners' equivalent rent rose 0.3 percent; and the index for lodging away from home advanced 1.3 percent. (Prior to seasonal adjustment, the index for lodging away from home rose 2.6 percent.) The index for household furnishings and operations declined 0.1 percent in June.

The transportation component, which declined in both April and May, turned up sharply in June, advancing 1.8 percent. More than nine-tenths of the June advance was due to the sharp increase in gasoline prices. The 8.8 percent increase in the index for gasoline more than offset the price declines registered in April and May. As of June, the index for gasoline was 0.6 percent higher than its previous peak level of March 2000. The index for new vehicles declined 0.1 percent in June after advancing 0.2 percent in May. The index for used cars and trucks rose 0.2 percent. Public transportation costs increased 1.0 percent, largely as a result of a 1.5 percent rise in airline fares. Airline fares have risen at an 18.7 percent SAAR thus far in 2000 after increasing 10.9 percent in all of 1999.

The index for apparel declined for the third consecutive month, down 0.6 percent in June. (Prior to seasonal adjustment, apparel prices fell 3.0 percent, reflecting seasonal price discounting on spring-summer wear.)

Medical care costs rose 0.4 percent in June and were 4.1 percent higher than a year ago. In June, the index for medical care commodities-- prescription drugs, and nonprescription drugs and medical supplies--rose 0.2 percent. The index for medical care services rose 0.5 percent in June. Charges for professional services and for hospital and related services increased 0.4 and 0.8 percent, respectively.

The index for recreation costs increased 0.3 percent in June, the same as in May. The index for admissions to movies, theaters, concerts, and sporting events rose 1.7 percent in June, accounting for about two- thirds of the overall increase in June recreation index.

The index for education and communication declined 0.1 percent in June, following a 0.1 percent increase in May. Educational costs rose 0.8 percent in June, while the index for communication declined 1.2 percent. The latter decrease reflects declines in the indexes for telephone services and for personal computers and peripheral equipment--down 1.3 and 2.8 percent, respectively.

The index for other goods and services declined for the second consecutive month, down 0.2 percent in June. Cigarette prices fell 1.4 percent in June, following a 2.8 percent decline in May, but have advanced at an 11.0 percent SAAR thus far this year.

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 0.6 percent in June.

Consumer Price Index data for July are scheduled for release on Wednesday, August 16, 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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