July 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 July, before seasonal adjustment, to a level of 172.6 (1982- 84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in July, the CPI-U increased 3.5 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 0.1 percent in July, prior to seasonal adjustment. The July level of 169.3 was 3.7 percent higher than the index in July 1999.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U rose 0.2 percent in July after increasing 0.6 percent in June. The energy index, which advanced 5.6 percent in June, rose 0.1 percent in July. A 2.0 percent increase in the index for energy services was largely offset by 1.6 percent decline in the index for petroleum-based energy. The food index advanced 0.5 percent in July, following a 0.1 percent increase in June. The index for food at home rose 0.7 percent, reflecting increases of 1.0 percent each in the indexes for fruits and vegetables, for cereals and bakery products, and for nonalcoholic beverages. Excluding food and energy, the CPI-U rose 0.2 percent in July, the same as in each of the previous three months.

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 seven months of 2000, the CPI-U rose at a 4.0 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.7 percent for all of 1999. The acceleration thus far in 2000 largely has been due to energy costs, which increased at a 22.6 percent annual rate in the first seven months of 2000 after advancing 13.4 percent in all of 1999. Food costs, which rose 1.9 percent in 1999, have risen at a 2.8 percent SAAR in the first seven months of 2000. Excluding food and energy, the CPI-U has advanced at a 2.6 percent rate compared with a 1.9 percent rise for all of 1999.

The food and beverages index increased 0.5 percent in July. The index for food at home, which rose 0.1 percent in June, increased 0.7 percent in July. Most of the major food at home groups contributed to the acceleration in July. The indexes for cereals and bakery products and for fruits and vegetables, each of which declined 0.7 percent in June, turned up in July, each advancing 1.0 percent. The index for nonalcoholic beverages also increased 1.0 percent, reflecting a 1.5 percent rise in the index for carbonated drinks. Within the fruits and vegetables group, a 3.2 percent increase in the index for fresh fruits more than offset a 0.7 percent decline in the index for fresh vegetables. The index for processed fruits and vegetables rose 0.3 percent. The index for dairy products turned up in July, advancing 0.6 percent, largely as a result of a 1.2 percent increase in milk prices. The index for meats, poultry, fish, and eggs rose 0.5 percent in July, the same as in June. In July, the indexes for pork and for poultry turned up, increasing 0.8 and 1.6 percent, respectively. The index for beef, which had risen 0.9 percent or more in each of the preceding 5 months, rose 0.1 percent in July. The index for other food at home was the only major grocery store food group to advance less in July than in the previous month, rising 0.2 percent after increasing 0.4 percent in June. The other two components of the food and beverages index--food away from home and alcoholic beverages-- increased 0.3 and 0.6 percent, respectively.

The index for housing increased 0.4 percent in July, following a 0.5 percent rise in June. The index for fuels and utilities rose sharply for the second consecutive month, advancing 1.6 percent in July after rising 2.2 percent in June. The index for natural gas, which rose 7.8 percent in June, increased 3.8 percent in July and has risen 20.1 percent in the first seven months of 2000. The index for electricity increased 1.1 percent in July. The index for fuel oil increased 1.5 percent in July and has risen 45.4 percent over the past 12 months. Shelter costs, which rose 0.4 percent in June, increased 0.2 percent in July. Within shelter, the indexes for rent and for owners' equivalent rent rose 0.4 and 0.2 percent, respectively, while the index for lodging away from home declined 0.5 percent. (Prior to seasonal adjustment, the index for lodging away from home rose 1.9 percent.) The index for household furnishings and operations, which declined slightly in June, advanced 0.5 percent in July, reflecting a 2.5 percent increase in the index for window and floor coverings and other linens.

The transportation component, which advanced 1.8 percent in June, declined 0.3 percent in July. The index for gasoline fell 2.0 percent, following an 8.8 percent increase in June. Despite the July decline, gasoline prices have advanced 18.3 percent since December after advancing 30.1 percent in all of 1999. The index for new vehicles, which declined 0.1 percent in June, rose 0.2 percent in July. (Prior to seasonal adjustment, new vehicle prices fell 0.3 percent In July.) The index for used cars and trucks turned down in July, declining 0.3 percent. Public transportation costs increased 0.5 percent, largely as a result of a 0.7 percent rise in airline fares. Airline fares have risen 9.7 percent thus far in 2000.

The index for apparel declined for the fourth consecutive month, down 1.0 percent in July. (Prior to seasonal adjustment, apparel prices fell 3.0 percent, reflecting seasonal price discounting on spring-summer wear.)

Medical care costs rose 0.3 percent in July to a level 4.1 percent higher than a year ago. In July, 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 0.4 percent. Charges for professional services and for hospital and related services increased 0.2 and 0.6 percent, respectively.

The index for recreation costs increased 0.3 percent in July, the same as in each of the preceding two months. The index for admissions to movies, theaters, concerts, and sporting events rose 1.1 percent in July, accounting for more than half of the overall increase in the July recreation index.

The index for education and communication rose 0.6 percent in July, following a 0.1 percent decrease in June. Educational costs rose 0.5 percent in July. The index for communication recorded its first increase since January, advancing 0.8 percent. An increase in the index for telephone services, reflecting a 1.4 percent rise in local charges, more than offset a 2.2 percent decrease in prices for personal computers and peripheral equipment.

The index for other goods and services increased 1.0 percent in July, following declines in each of the preceding two months. Cigarette prices, which fell 1.4 percent in June, rose 3.2 percent in July and have risen 8.8 percent thus far in 2000.

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 0.2 percent in July.

Consumer Price Index data for August are scheduled for release on Friday, September 15, 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 April 2000 CPI release, hedonic quality adjustments for Refrigerator/freezers, Microwave ovens, and College textbooks are being incorporated into the index effective with the July 2000 CPI. Refrigerator/freezers and Microwave ovens are part of the Major appliances stratum; The item College textbooks is part of the Educational books and supplies stratum. Papers describing these adjustments will be available on the CPI's web site (http://stats.bls.gov/cpihome.htm).

Effective with the CPI for October 2000, BLS will extend hedonic quality adjustment to Washing machines and Clothes dryers. These items are both part of the Major appliances 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. BLS plans to extend this method to additional items in the CPI. As BLS does so, it 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, Washing machines are estimated to represent 18 percent of the weight and Clothes dryers about 13 percent. Refrigerator/freezers are estimated to represent 33 percent of the weight and Microwave ovens about 11 percent. BLS does not employ hedonic quality adjustment for the remaining items in this stratum. Those items include home freezers and conventional stoves and ovens.

The hedonic models that BLS analysts developed for Washing machines and Clothes dryers use observations collected for the CPI, supplemented with additional observations that the BLS collected specifically for this purpose. Papers describing this work are in preparation and will be available before release of the October 2000 CPI.

Additional work on hedonic quality adjustment is underway at BLS.

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

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