August 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 August, before seasonal adjustment, to a level of 172.7 (1982-84=100), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. For the 12-month period ended in August, the CPI-U increased 3.4 percent.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) declined 0.1 percent in August, prior to seasonal adjustment. The August level of 169.2 was 3.3 percent higher than the index in August 1999.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U declined 0.1 percent in August after increasing 0.2 percent in July. The energy index, which rose 0.1 percent in July, fell 2.9 percent in August. The indexes for petroleum-based energy and for energy services declined 5.5 and 0.2 percent, respectively. The food index rose 0.2 percent in August. The index for food at home increased 0.3 percent after advancing 0.7 percent in July, with each of the major food at home groups except fruits and vegetables contributing to the deceleration. Excluding food and energy, the CPI-U rose 0.2 percent in August, the same as in each of the previous four 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 eight months of 2000, the CPI-U rose at a 3.4 percent seasonally adjusted annual rate (SAAR). This compares with an increase of 2.7 percent for all of 1999. Energy costs have increased at a 14.3 percent annual rate in the first eight 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 thus far this year. 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 0.2 percent in August. The index for food at home, which rose 0.7 percent in July, increased 0.3 percent in August. Each of the major food at home groups except fruits and vegetables contributed to the deceleration in August. The index for fruits and vegetables rose 1.2 percent in August, following a 1.0 percent rise in July. Over the past 12 months, however, fruit and vegetable prices have risen only 0.2 percent. In August, within the fruits and vegetables group, the indexes for fresh fruits and fresh vegetables rose 0.5 and 2.3 percent, respectively. The index for processed fruits and vegetables rose 0.5 percent. Among the other major food at home groups, the indexes for cereal and bakery products and for dairy products each increased 0.3 percent. The index for meats, poultry, fish, and eggs rose 0.2 percent in August. Meat prices continue to advance; the indexes for beef and for pork rose 0.5 and 0.8 percent, respectively, in August and are up 8.4 and 9.8 percent in the past 12 months. Poultry prices turned down in August, declining 0.3 percent, and have risen only 1.8 percent since August 1999. The index for other food at home rose 0.1 percent in August, while the index for nonalcoholic beverages declined 0.3 percent. The other two components of the food and beverages index--food away from home and alcoholic beverages--each increased 0.2 percent in August.

The index for housing increased 0.2 percent in August, following a 0.4 percent rise in July. The index for fuels and utilities, which rose sharply in both June and July, turned down in August. Each of the three principal household fuels failed to advance in August. The index for fuel oil decreased 0.1 percent in August, following a 20.5 percent rise over the past seven months. The index for natural gas, which rose 20.1 percent in the first seven months of 2000, declined 0.7 percent in August. The index for electricity was unchanged in August after increasing 1.9 percent in the first seven months of the year. (Prior to seasonal adjustment, charges for electricity fell 0.4 percent in August after increasing 9.4 percent in the first seven months of 2000.) Shelter costs, which rose 0.2 percent in July, increased 0.3 percent in August. Within shelter, the indexes for rent and for owners' equivalent rent each rose 0.3 percent, while the index for lodging away from home was unchanged. The index for household furnishings and operations, which advanced 0.5 percent in July, rose 0.1 percent in August.

The transportation component declined for the second consecutive month, down 1.1 percent in August. The index for gasoline fell 6.0 percent, following a 2.0 percent decrease in July. Despite the recent declines, gasoline prices have advanced 11.2 percent since December after advancing 30.1 percent in all of 1999. The index for new vehicles, which rose 0.2 percent in July, declined 0.2 percent in August. The index for used cars and trucks fell 0.1 percent. Public transportation costs increased 0.9 percent, largely as a result of a 1.5 percent rise in airline fares. Airline fares have risen 11.3 percent thus far in 2000.

The index for apparel rose 0.2 percent in August, its first monthly increase since March. Price increases associated with the introduction of fall-winter wear more than offset price declines on spring-summer clothing.

Medical care costs rose 0.4 percent in August to a level 4.2 percent higher than a year ago. In August, the index for medical care commodities- -prescription and nonprescription drugs and medical supplies--rose 0.3 percent. The index for medical care services rose 0.4 percent. Charges for professional services and for hospital and related services increased 0.4 and 0.8 percent, respectively.

The index for recreation costs increased 0.1 percent in August, following increases of 0.3 percent in each of the preceding three months. Smaller increases in the indexes for admissions to movies, theaters, concerts, and sporting events and for club membership dues and fees for participant sports were largely responsible for the moderation.

The index for education and communication rose 0.2 percent in August, following a 0.6 percent rise in July. Educational costs declined 0.2 percent, partially offsetting a 0.4 percent increase in the index for communication. The index for tuition, other school fees, and child care declined 0.2 percent. (Prior to seasonal adjustment, this index rose 1.2 percent.) Within the index for communication, the index for telephone services rose 0.7 percent, as a 2.0 percent rise in local charges more than offset a 0.7 percent decrease in long distance charges.

The index for other goods and services decreased 0.3 percent in August, following a 1.0 percent rise in July. Cigarette prices, which rose 3.2 percent in July, declined 1.7 percent.

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

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

Consumer Price Index data for September are scheduled for release on Wednesday, October 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 July 2000 CPI release, 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.

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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