December 2014 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) declined 0.4 percent in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.8 percent before seasonal adjustment.

The gasoline index continued to fall sharply, declining 9.4 percent and leading to the decrease in the seasonally adjusted all items index. The fuel oil index also fell sharply, and the energy index posted its largest one-month decline since December 2008, although the indexes for natural gas and for electricity both increased. The food index, in contrast, rose 0.3 percent, its largest increase since September.

The index for all items less food and energy was unchanged in December, following a 0.2 percent increase in October and a 0.1 percent rise in November. This was only the second time since 2010 that it did not increase. The shelter index continued to rise, and the index for medical care posted its largest increase since August 2013. However, these increases were offset by declines in a broad array of indexes including apparel, airline fares, used cars and trucks, household furnishings and operations, and new vehicles.

The all items index increased 0.8 percent over the last 12 months. This is notably lower than the 1.3 percent change for the 12 months ending November. The energy index has declined 10.6 percent over the span. In contrast, the 3.4 percent increase in the food index is its largest 12-month increase since February 2012. The index for all items less food and energy has increased 1.6 percent over the last 12 months, its smallest 12-month change since the 12 months ending February 2014.

Seasonally adjusted changes from preceding month Un- adjusted 12-mos. June July Aug. Sep. Oct. Nov. Dec. ended 2014 2014 2014 2014 2014 2014 2014 Dec. 2014

Consumer Price Index Data for December 2014

Food

The food index rose 0.3 percent in December after a 0.2 percent increase in November. The index for food at home rose 0.3 percent with five of the six major grocery store food groups increasing. The index for dairy and related products posted the largest increase, rising 0.6 percent after declining in November. The fruits and vegetables index rose 0.4 percent, with the fresh vegetables index rising 2.4 percent but the index for fresh fruits declining 1.3 percent. The index for meats, poultry, fish, and eggs increased 0.3 percent as the index for beef and veal continued to rise, advancing 0.7 percent. The index for other food at home increased 0.3 percent, and the cereals and bakery products index advanced 0.2 percent. The nonalcoholic beverages index, in contrast, declined in December, falling 0.4 percent after rising in each of the previous three months. The food at home index has risen 3.7 percent over the last 12 months, with all six groups rising over the span. The index for food away from home rose 0.3 percent in December after a 0.4 percent increase in November, and has risen 3.0 percent over the last year.

Energy

The energy index continued to decline, falling 4.7 percent in December after a 3.8 percent decrease in November. This was its sixth decline in a row, and the index has fallen 13.3 percent over the six month span. The gasoline index fell 9.4 percent in December and has declined 22.4 percent since June. (Before seasonal adjustment, gasoline prices fell 11.1 percent in December.) The fuel oil index also continued to decline, falling 7.8 percent, its largest decline since June 2012. However, the index for natural gas turned up in December, rising 1.5 percent after falling in October and November. The electricity index also increased in December, rising 0.8 percent.

All items less food and energy

The index for all items less food and energy was unchanged in December. The shelter index increased, advancing 0.2 percent, with the indexes for rent, owners' equivalent rent, and lodging away from home all rising 0.2 percent. The medical care index rose 0.5 percent in December. The index for prescription drugs rose 0.9 percent, and the hospital services index increased 0.5 percent. The tobacco index advanced in December, increasing 0.8 percent, and the personal care index rose 0.1 percent. A wide array of declines offset these increases. The apparel index fell 1.2 percent in December following a 1.1 percent decline the prior month. The index for airline fares, which rose in October and November, fell sharply in December, declining 5.0 percent. The index for used cars and trucks fell 1.2 percent, the same decline as last month. The index for household furnishings and operations fell 0.3 percent, as did the alcoholic beverages index. The index for new vehicles declined 0.1 percent, the same decrease as in November.

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent over the last 12 months to an index level of 234.812 (1982-84=100). For the month, the index fell 0.6 percent prior to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.3 percent over the last 12 months to an index level of 229.909 (1982-84=100). For the month, the index fell 0.7 percent prior to seasonal adjustment.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 0.3 percent over the last 12 months. For the month, the index fell 0.8 percent on a not seasonally adjusted basis. Please note that the indexes for the post-2012 period are subject to revision.

Year in Review

The CPI rose 0.8 percent in 2014 after a 1.5 percent increase in 2013. This is the second-smallest December-December increase in the last 50 years, trailing only the 0.1 percent increase in 2008. It is considerably lower than the 2.1 percent average annual increase over the last ten years.

The energy index, which rose slightly in both 2012 and 2013, declined sharply in 2014, falling 10.6 percent, the largest decline since 2008. The gasoline index was the main cause of the decline, falling 21.0 percent, with most of the decrease over the last few months of the year. This followed a 1.0 percent decline in 2013. The fuel oil index declined as well, falling 19.1 percent in 2014 after a 1.8 percent decline in 2013. In contrast, the energy services index accelerated in 2014, rising 3.7 percent after a 2.4 percent advance in 2013. The electricity index rose 3.1 percent in 2014, similar to its 3.2 percent advance in 2013. The index for natural gas, which fell slightly in 2013, rose 5.8 percent in 2014, ending a streak of five years of declines. Despite the decline in 2014, the energy index has risen at a 3.2 percent annual rate over the past 10 years.

The index for food rose 3.4 percent in 2014, a substantial acceleration from its 2013 increase of 1.1 percent. The index for food at home rose 3.7 percent in 2014 after rising only 0.4 percent in 2013. All six major grocery store food group indexes increased in 2014. The index for meats, poultry, fish, and eggs, which rose 2.9 percent in 2013, increased 9.2 percent, its largest December-December increase since 2003. The index for beef and veal rose 18.7 percent in 2014. The index for dairy and related products rose 5.3 percent in 2014, while the index for fruits and vegetables advanced 3.2 percent; both had declined in 2013. Also turning up after declining in 2013 was the index for other food at home (up 1.5 percent) and the index for nonalcoholic beverages (up 0.7 percent). The only major grocery store food group index not to accelerate was cereals and bakery products, which repeated its 2013 increase of 0.5 percent. The index for food away from home rose 3.0 percent in 2014 after increasing 2.1 percent in 2013. Over the last ten years, the food index has risen at an average annual rate of 2.7 percent.

The index for all items less food and energy rose 1.6 percent in 2014, a slight deceleration from its 1.7 percent increase in 2013, and below its 1.9 percent annual rate over the past ten years. The shelter index accelerated in 2014, increasing 2.9 percent after advancing 2.5 percent in 2013. This was its largest increase since 2007. The rent index rose 3.4 percent and the index for owners' equivalent rent increased 2.6 percent. The medical care index also accelerated, rising 3.0 percent after a 2.0 percent increase in 2013. The new vehicles index accelerated slightly, rising 0.5 percent in 2014 after a 0.4 percent advance the previous year. The personal care index decelerated slightly, rising 1.3 percent in 2014 following a 1.4 percent increase in 2013. The recreation index was unchanged in 2014 after rising slightly in 2013.The index for used cars and trucks turned down in 2014, falling 4.2 percent after rising 2.0 percent in 2013. Similarly, the apparel index, which rose 0.6 percent in 2013, fell 2.0 percent in 2014. The index for household furnishings and operations continued to decline in 2014, falling 0.9 percent after a 1.4 percent decrease the previous year. The index for airline fares also continued to fall, declining 4.7 percent after a 1.4 percent decrease the prior year.

Chained Consumer Price Index to be Revised Quarterly

Effective with the release of CPI data for January 2015 on February 26, 2015, the Bureau of Labor Statistics will begin quarterly revisions of the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). In addition, a Constant Elasticity of Substitution (CES) formula will replace the geometric mean formula for the calculation of Initial and Interim C-CPI-U indexes.

More frequent weight updates and index revisions. Whereas CPI-U and CPI-W indexes are considered final when released, the final C-CPI-U index is published with a lag for administration and processing of Consumer Expenditure Survey household data, the source of the final C-CPI-U monthly expenditure weights. Under the traditional annual revision process, the final C-CPI-U index was published 13 to 24 months after the CPI-U. The CPI program is implementing a new estimation system that calculates monthly expenditure weights and revised C-CPI-U indexes on a quarterly basis. Under the new quarterly process, the final C-CPI-U index will lag the CPI-U index by 10 to 12 months.

Final C-CPI-U indexes for 2014 will be published on the following quarterly schedule:

Index Month Release Month January 2013 - March 2014 February 2015 April - June 2014 May 2015 July - September 2014 August 2015 October - December 2014 November 2015

Initial C-CPI-U indexes will continue to be released concurrent with the CPI-U release, and will be updated as interim C-CPI-U indexes with every quarterly revision until the final version is published.

New formula for initial and interim C-CPI-U Indexes. The CES formula will replace the geometric mean formula for initial and interim C-CPI-U indexes effective with the February 26, 2015 release. The CES formula is an improvement over the geometric mean formula because the CES formula more closely models consumer substitution behavior.

With the use of the geometric mean formula, consumers are assumed to consistently substitute within item classification to goods whose prices are falling relative to others. Using a fixed quantity formula, such as a Laspeyres formula, consumers are assumed to make no substitutions between goods when faced with relative price change. In reality, consumers respond to relative price changes differently than either model implies. The CES formula attempts to capture the amount of substitution occurring in the marketplace as consumers respond to changing relative prices.

For further details on the implementation of the CES formula and the frequency of weight updates for the C-CPI-U, please contact the CPI Information and Analysis section at (202) 691-6966.

New Estimation System

Effective with the release of the January 2015 CPI on February 26, 2015, the Bureau of Labor Statistics will utilize a new estimation system for the Consumer Price Index. The new estimation system, the first major improvement to the existing system in over 25 years, is a redesigned, state-of-the-art system with improved flexibility and review capabilities. For more information on this new system, please see http://www.bls.gov/cpi/cpinewest.htm.

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.