December 2003 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) decreased 0.1 percent in December, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The December level of 184.3 (1982-84=100) was 1.9 percent higher than in December 2002.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) decreased 0.2 percent in December, prior to seasonal adjustment. The December level of 179.9 was 1.6 percent higher than in December 2002.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U increased 0.2 percent in December, following a decline of 0.2 percent in November. The index for food rose 0.6 percent in December with prices for food at home up 0.8 percent, reflecting, in part, another large increase in beef prices. Energy costs rose 0.2 percent in December, following a 3.0 percent drop in November. The index for all items less food and energy increased 0.1 percent in December, compared with a 0.1 percent decrease in November. Shelter costs, which were unchanged in November, increased 0.3 percent in December.

See pages 5 - 7 for notes on planned changes in the CPI in 2004.

At a seasonally adjusted annual rate (SAAR), consumer prices were unchanged in the fourth quarter of 2003. In the first three quarters changes were at annual rates of 5.2, -0.7, and 3.1 percent, respectively. For the 12 month period ended in December, the CPI rose 1.9 percent. In 2002 the increase was 2.4 percent. Although the index for energy oscillated markedly throughout the year--up at a 76.5 percent SAAR in the first quarter, down at a 24.5 percent rate in the second quarter, up at a 27.8 percent rate in the third quarter, and down at a 23.8 percent rate in the fourth quarter of 2003--the increase for the year of 6.9 percent was less than the 10.7 percent increase in 2002. The food index rose 3.6 percent in 2003. The index for meats, poultry, fish, and eggs rose 11.5 percent, accounting for about two-thirds of the 4.5 percent advance in the index for food at home,. Beef prices rose 23.5 percent in 2003, their largest annual advance since a 28.3 percent increase in 1978.

Excluding food and energy, the CPI-U advanced at a 1.0 percent SAAR in the fourth quarter, following increases at rates of 0.8, 1.0, and 1.5 percent in the first three quarters of 2003. The 1.1 percent advance in 2003 compares with a 1.9 percent rise in all of 2002. The principal reason for the smaller increase in 2003 was the smaller advance in shelter costs--up 2.2 percent in 2003 compared with a 3.1 percent rise in 2002. Also contributing to the moderation in 2003 were smaller increases in the indexes for motor vehicle insurance and medical care, a downturn in the index for cigarettes, coupled with a larger decline in used car prices. The annual rates for selected groups for the last eight years are shown below.

Percentage change 12 months ended in December

The food and beverages index rose 0.6 percent in December. The index for food at home increased 0.8 percent, following increases of 0.7 percent in each of the preceding two months. Each of the six major grocery store food groups advanced in December, with the indexes for meats, poultry, fish and eggs, for dairy products, and for nonalcoholic beverages recording increases of more than 1.0 percent. Within the meats, poultry, fish, and eggs group, beef prices continued to advance, increasing 1.7 percent in December. Prices for poultry, eggs and other meats also increased substantially in December, more than offsetting a small decline in pork prices. The indexes for dairy products and for nonalcoholic beverages each turned up in December, reflecting price increases for ice cream and related products and for carbonated drinks, respectively, each of which had declined substantially in November. The indexes for other food at home, for fruits and vegetables, and for cereals and bakery products increased 0.7, 0.3, and 0.2 percent, respectively. Within the fruits and vegetables group, a 1.5 percent increase in the index for fresh vegetables more than offset declines in the indexes for fresh fruits and for processed fruits and vegetables. The other two components of the food and beverages index--food away from home and alcoholic beverages--each increased 0.3 percent.

The index for housing, which declined 0.1 percent in November, increased 0.3 percent in December. Each of the three major housing groups contributed to the acceleration. Shelter costs, which were unchanged in November, increased 0.3 percent in December. Within shelter, the indexes for rent, for owners' equivalent rent, and for lodging away from home rose 0.2, 0.1, and 1.7 percent, respectively. (Prior to seasonal adjustment, the index for lodging away from home declined 1.8 percent.). During the 12 month period ended in December, the indexes for rent and owners' equivalent rent rose 2.7 and 2.0 percent, respectively. In 2002 these indexes increased 3.1 and 3.3 percent, respectively. The index for fuels and utilities, which declined 0.9 percent in November, increased 0.5 percent in December. Charges for natural gas and for electricity each turned up in December, advancing 1.9 and 0.1 percent, respectively, and the index for fuel oil rose 0.6 percent. (Prior to seasonal adjustment, fuel oil prices increased 2.1 percent.) During the 12 month period ended in December, charges for natural gas and for electricity rose 17.4 and 2.6 percent, respectively, and fuel oil prices increased 7.8 percent. The index for household furnishings and operations, turned up in December, increasing 0.2 percent, but fell 1.8 percent during the 12 month period ended in December.

The transportation index decreased for the third consecutive month-- down 0.2 percent in December. The index for gasoline declined 0.1 percent, after falling sharply in October and November. Despite the recent declines, gasoline prices are still 6.8 percent higher than in December 2002. The index for new vehicles was unchanged in December. (As of December, about 72 percent of the new vehicle sample was represented by 2004 models. The 2004 models will continue to be phased in, with appropriate adjustments for quality change, over the next several months as they replace old models at dealerships. For a report on quality changes for the 2004 vehicles represented in the Producer Price Index sample, see news release USDL-03-721, dated November 14, 2003.) New vehicle prices are 1.8 percent lower than in December 2002. The index for used cars and trucks decreased 0.7 percent in December and this index has declined 11.8 percent in the last 12 months. The index for public transportation declined 1.1 percent in December, reflecting a 1.9 percent drop in airline fares. These fares fell 0.1 percent in all of 2003 after registering declines in 2001 and 2002 of 3.9 and 2.4 percent, respectively.

The index for apparel declined 0.4 percent in December. (Prior to seasonal adjustment, apparel prices fell 3.3 percent, reflecting pre- holiday discounting.) During the 12 month period ended in December, apparel prices declined 2.1 percent, their sixth consecutive annual decline.

Medical care costs rose 0.6 percent in December and are 3.7 percent higher than a year ago. The index for medical care commodities-- prescription drugs, nonprescription drugs, and medical supplies--increased 0.4 percent. The index for medical care services rose 0.6 percent in December. The indexes for professional services and for hospital and related services increased 0.5 and 0.6 percent, respectively. In the 12 month period ended in December, these indexes advanced 2.8 and 6.4 percent, respectively.

The index for recreation was unchanged in December. Increases in the indexes for admissions to movies, theaters, concerts, and sporting events and for pets, pet products and services were offset by decreases in the indexes for toys and for video and audio products and services. During the 12 months ended in December, the indexes for admissions and for pets increased 3.4 and 2.7 percent, respectively, while prices for toys, for sporting goods and equipment, and for photography all declined. The index for video and audio increased 0.1 percent as a 3.8 percent increase in cable television charges more than offset declines in each of the other components within that category.

The index for education and communication increased 0.4 percent in December. Educational costs increased 0.7 percent, while communication costs were unchanged. Within the former category, the index for educational books and supplies increased 2.6 percent During the 12 months ended in December, educational costs rose 7.2 percent, largely as a result of a 9.8 percent rise in the index for college tuition and fees. The index for communication declined 3.9 percent during the last 12 months, reflecting declines in long distance telephone services and for prices of personal computers and peripheral equipment--down 10.0 and 17.8 percent, respectively.

The index for other goods and services increased 0.1 percent in December, reflecting a 0.3 percent increase in the index for tobacco and smoking products. These prices, however, declined 0.4 percent in all of 2003, their first decrease since a 5.9 percent drop in 1993.

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 December.

Chained Consumer Price Index for All Urban Consumers (C-CPI-U)

The C-CPI-U declined 0.2 percent in December on a not seasonally adjusted basis. The December level of 107.5 (December 1999=100) was 1.4 percent higher than in December 2002. Table 7 contains the most recent indexes for all items and the component series that are published. Data are published monthly in the CPI Detailed Report and are available on the CPI home page: http://www.bls.gov/cpi/. Please note that the indexes for the post-2001 period are subject to revision.

Consumer Price Index data for January are scheduled for release on Friday, February 20, 2004, at 8:30 A.M. (EST).

Each year with the release of the January CPI, seasonal adjustment factors are recalculated to reflect price movements from the just-completed calendar year. This routine annual recalculation may result in revisions to seasonally adjusted indexes for the previous 5 years. BLS will make available recalculated seasonally adjusted indexes, as well as recalculated seasonal adjustment factors, for the period January 1999 through December 2003, on Wednesday, February 18, 2004. This date is two working days before the scheduled release of the January 2004 CPI on Friday, February 20, 2004.

The revised indexes and seasonal factors will be available on the internet. The address is http://www.bls.gov/cpi. Look under Tables Created by BLS and select Revised Seasonally Adjusted Data, 2003.

Planned Changes in the Consumer Price Index in 2004

Expenditure Weight Update

Effective with release of data for January 2004, the Bureau of Labor Statistics (BLS) will update the consumption expenditure weights in the Consumer Price Index for All Urban Consumers (CPI-U) and Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to the 2001-02 period. The updated expenditure weights for these indexes will replace the 1999-2000 weights that were introduced effective with the January 2002 CPI release. As originally announced by BLS in December 1998, CPI expenditure weights will continue to be updated at two-year intervals subsequent to the 2004 updating.

For the first six months of 2004, BLS will continue to calculate and publish selected CPI-U and CPI-W "overlap" indexes using the 1999-2000 expenditure pattern that was introduced into the CPI in 2002. These indexes will be compiled on a not seasonally adjusted basis. Comparison of these index series to the corresponding updated series will enable users of the CPI to observe the effects of the expenditure weight change. The subsequent expenditure updates scheduled in 2006 and every two years thereafter also will be accompanied by the publication of overlap indexes for a six-month period using the previous expenditure pattern.

C-CPI-U Index Revisions

As scheduled, effective with release of data for January 2004, the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) will undergo its second annual index revision. C-CPI-U indexes for the 12 months of 2002 will be issued in final form and values for the 12 months of 2003 will be revised and issued as interim. Calculation of the preliminary versions of the C-CPI-U--the initial version for January and the subsequent months of 2004 and the interim (revised initial) indexes for 2003--will employ the 2001-02 expenditure weights also used in the CPI- U and CPI-W. Note that the final values of the C-CPI-U employ monthly expenditure weights corresponding to the price collection period in their calculation. Thus, in calculation of the final (revised interim) C-CPI-U values for the months of 2002, the biennial 1999-2000 expenditure weights will be replaced with separate monthly expenditure weights.

Elementary Index Formula Changes

Effective with release of data for January 2004, a geometric mean formula will replace the arithmetic mean formula in the calculation of the elementary indexes in the CPI-U, CPI-W, and C-CPI-U for (1) cable and satellite television and radio services (formerly cable TV) and for (2) eyeglasses and eye care. The geometric mean formula at the elementary index level is more appropriate for use in categories in which the consumer may alter his or her spending in response to changing prices within that category. Since the original decision to employ an arithmetic mean was made by BLS in 1998, changes in the markets for the above- mentioned categories have led to increased opportunity for consumer substitution behavior within those categories. The BLS introduced the geometric mean formula for calculating most of the basic components of the CPI-U and CPI-W with release of the CPI for January 1999.

The BLS will continue to evaluate the appropriateness of the formula used in the calculation of the elementary item indexes and on an annual basis may change or adjust the formula for constructing these indexes. A description of the 1999 adoption of the geometric mean formula is available on the internet at http://www.bls.gov/opub/mlr/1998/10/contents.htm

Title Changes

The following index and average price series will have new titles beginning in January 2004. These series are continuous. The new titles serve to clarify the content of each series.

Index series with new titles

Item Old title New title code

SEHF02 Utility natural gas Utility (piped) gas service service

SERA02 Cable television Cable and satellite television and radio service

SEED01 Telephone services, Land-line telephone local charges services, local charges

SEED02 Telephone services, Land-line telephone long distance charges services, long distance charges

SS27051 Interstate toll calls Land-line interstate toll calls

SS27061 Intrastate toll calls Land-line intrastate toll calls

SEED03 Cellular telephone Wireless telephone services services

SEEE Information and Information technology, information processing hardware, and services other than telephone services

SEEE03 Computer information Internet services and processing services electronic information providers

SEEE04 Other information Telephone hardware, processing equipment calculators, and other consumer information items

Average price series with new titles

Item Old title New title code

72620 Utility natural gas Utility (piped) gas per per therm therm

72601 Utility natural gas - Utility (piped) gas - 40 40 therms therms

72611 Utility natural gas - Utility (piped) gas - 100 100 therms therms

Expanded Collection of Price Data

During the last year, the CPI program completed its conversion to Computer Assisted Data Collection (CADC). Due to the efficiencies gained from the conversion to CADC, BLS will extend data collection to cover the entire month, beginning with data for January 2004.

The new data collection process utilizes hand-held computers called penpads, along with software developed by BLS staff, to collect price and other item characteristic data in stores each month. Data collection instructions are transmitted electronically from Washington to each data collector's penpad. After completing collection the field staff transmit data back to Washington. This electronic collection provides numerous benefits. Many data edits can take place during collection. The accuracy and efficiency of data entry and review are improved by having field staff directly enter data rather than filling out paper survey forms by hand for later computer input by clerical staff. The progress of data collection also can be monitored more effectively throughout the month.

Lastly, the introduction of CADC reduces the time required to transmit and process data. With electronic collection and transmission, the CPI will be able to eliminate the mailing and data entry functions, allowing the BLS to collect prices during the entire index month without compromising the timeliness of the CPI release, which takes place during the middle of the subsequent month.

CPI data collection is scheduled in terms of business days--weekdays excluding holidays. Currently, data collection covers three pricing periods, each comprising six business days in most months and five days in November and December. Consequently, the last day of scheduled data collection is usually the 18th business day of the month. This has allowed time during the end of the month for the mailing of paper schedules back to the Washington Office and the data entry of the information on these schedules. Starting in January 2004, the three pricing periods will have variable lengths, between six and eight business days long. The third pricing period now normally will end on the last business day of the month.

Facilities for Sensory Impaired

Information from this release will be made available to sensory impaired individuals upon request. Voice phone: 202-691-5200, Federal Relay Services: 1-800-877-8339. For a recorded message of Summary CPI data, call (202) 691-5200.