CPI for all items increases 0.2% in May as energy, shelter increases outweigh food decline

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers increased 0.2 percent in May after rising 0.4 percent in April. The index for all items less food and energy rose 0.2 percent in May, the same increase as in April.
Consumer Price Index

Transmission of material in this release is embargoed until
8:30 a.m. (EDT) June 16, 2016 USDL-16-1197

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CONSUMER PRICE INDEX – MAY 2016

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent
in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics
reported today. Over the last 12 months, the all items index rose 1.0 percent
before seasonal adjustment.

The food index declined in May, but the indexes for energy and all items less
food and energy rose, resulting in the seasonally adjusted all items increase.
The food index fell 0.2 percent, as all six major grocery store food group
indexes declined. The energy index increased 1.2 percent as the gasoline index
rose 2.3 percent and the indexes for fuel oil and natural gas also advanced.

The index for all items less food and energy increased 0.2 percent in May. The
shelter index rose 0.4 percent, and the indexes for medical care, apparel,
motor vehicle insurance, and education were among indexes that also increased.
These advances more than offset declines in an array of indexes including used
cars and trucks, communications, household furnishings and operations, airline
fares, and new vehicles.

The all items index rose 1.0 percent for the 12 months ending May, compared to
a 1.1-percent increase for the 12 months ending April. The index for all items
less food and energy rose 2.2 percent over the last 12 months. The food index
has risen 0.7 percent over the last year, with the index for food at home
declining 0.7 percent and the index for food away from home rising 2.6 percent.
The energy index has declined 10.1 percent over the past 12 months, with all
major components falling over the span.

Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city
average

Seasonally adjusted changes from
preceding month
Un-
adjusted
Nov. Dec. Jan. Feb. Mar. Apr. May 12-mos.
2015 2015 2016 2016 2016 2016 2016 ended
May 2016

All items……………… .1 -.1 .0 -.2 .1 .4 .2 1.0
Food…………………. -.1 -.2 .0 .2 -.2 .2 -.2 .7
Food at home…………. -.3 -.4 -.2 .2 -.5 .1 -.5 -.7
Food away from home (1).. .2 .1 .3 .1 .2 .2 .2 2.6
Energy……………….. .3 -2.8 -2.8 -6.0 .9 3.4 1.2 -10.1
Energy commodities……. .7 -4.8 -4.8 -12.5 1.9 7.8 2.4 -16.9
Gasoline (all types)…. .8 -4.8 -4.8 -13.0 2.2 8.1 2.3 -16.9
Fuel oil (1)………… -1.3 -7.8 -6.5 -2.9 1.7 1.9 6.2 -23.6
Energy services………. -.2 -.7 -.7 .1 .2 -.1 .2 -2.0
Electricity…………. .2 -.4 -.7 -.2 .4 -.3 -.2 -1.3
Utility (piped) gas
service………….. -1.7 -1.9 -.6 1.0 -.7 .6 1.7 -4.7
All items less food and
energy…………….. .2 .2 .3 .3 .1 .2 .2 2.2
Commodities less food and
energy commodities…. -.1 -.1 .2 .3 -.2 -.1 -.2 -.5
New vehicles………… .0 .0 .3 .2 .0 -.3 -.1 -.2
Used cars and trucks…. .1 .2 .1 .2 -.1 -.3 -1.3 -2.3
Apparel…………….. -.1 -.2 .6 1.6 -1.1 -.3 .8 .5
Medical care commodities .2 .1 .4 .6 .3 .5 -.2 2.2
Services less energy
services………….. .3 .2 .3 .3 .2 .3 .3 3.2
Shelter…………….. .2 .2 .3 .3 .2 .3 .4 3.4
Transportation services .5 .3 .4 .2 .2 .7 .3 3.2
Medical care services… .3 .1 .5 .5 .1 .3 .5 3.5

1 Not seasonally adjusted.

Consumer Price Index Data for May 2016

Food

The food index declined 0.2 percent in May following a 0.2-percent increase in
April. The index for food at home fell 0.5 percent, its fifth decline in the
last 7 months. All the major grocery store food group indexes declined in May.
The fruits and vegetables index fell 0.7 percent, its third decrease in a row.
The index for dairy and related products fell 0.6 percent in May after rising
in April. The index for meats, poultry, fish, and eggs declined for the ninth
consecutive month, falling 0.5 percent as the index for eggs decreased 2.8
percent. The index for other food at home fell 0.5 percent and the cereals and
bakery products index declined 0.4 percent. The nonalcoholic beverages index
posted the smallest decline, falling 0.1 percent.

The food at home index has declined 0.7 percent over the past year. The index
for meats, poultry, fish, and eggs has declined 3.2 percent over the span with
the indexes for eggs, beef, pork, poultry, and fish all posting declines. The
index for dairy and related products fell 2.2 percent over the past 12 months,
and the cereals and bakery products index fell slightly, declining 0.2 percent.
The other major grocery store food group indexes rose over the past 12 months,
but only modestly; the 1.0-percent increase in the fruits and vegetables index
was the largest of the increases. The index for food away from home advanced
0.2 percent in May and has risen 2.6 percent over the last 12 months.

Energy

The energy index rose 1.2 percent in May, its third increase in a row. The
gasoline index continued to rise, increasing 2.3 percent in May after an
8.1-percent advance in April. (Before seasonal adjustment, gasoline prices
increased 6.6 percent in May.) The fuel oil index also rose, increasing 6.2
percent in May after smaller increases in March and April. The index for
natural gas increased as well, rising 1.7 percent. The electricity index was
the only major energy component to decline, falling 0.2 percent after a
0.3-percent decline in April.

Despite the recent increases, the energy index and all of its major components
still show declines over the past year. The fuel oil index has fallen 23.6
percent and the gasoline index fell 16.9 percent. The index for natural gas
decreased 4.7 percent, while the electricity index fell 1.3 percent.

All items less food and energy

The index for all items less food and energy increased 0.2 percent in May, the
same increase as in April. The increase was mainly due to a rise in the
shelter index, which increased 0.4 percent in May, its largest advance since
February 2007. The rent index rose 0.4 percent, while the index for owners’
equivalent rent increased 0.3 percent. The index for lodging away from home
rose 0.7 percent after declining in March and April. The medical care index
increased 0.3 percent, with the index for physicians’ services rising 1.0
percent and the hospital services index increasing 0.7 percent, but the
prescription drug index falling 0.4 percent. The apparel index also rose in
May, increasing 0.8 percent after falling in March and April. The index for
motor vehicle insurance rose 0.9 percent in May following a 1.2-percent
increase in April. Also increasing in May were the indexes for personal care
(0.4 percent), education (0.3 percent), and tobacco (0.2 percent).

Several indexes declined in May, including used cars and trucks, which fell
1.3 percent, its largest decline since March 2009. The communication index
fell 0.4 percent in May, and the index for household furnishings and
operations decreased 0.3 percent, its third straight decline. The index for
airline fares fell 1.5 percent after rising 1.1 percent in April. The new
vehicles index fell 0.1 percent in May, as did the index for alcoholic beverages.

The index for all items less food and energy increased 2.2 percent over the past
12 months. Over 60 percent of this increase is accounted for by the shelter
index, which rose 3.4 percent over the span, its largest 12 month increase since
September 2007. The rent index increased 3.8 percent over the past year, while
the index for owners’ equivalent rent rose 3.3 percent and the index for lodging
away from home advanced 3.8 percent.

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.0 percent over
the last 12 months to an index level of 240.236 (1982-84=100). For the month, the
index increased 0.4 percent prior to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)
increased 0.7 percent over the last 12 months to an index level of 234.444
(1982-84=100). For the month, the index increased 0.4 percent prior to seasonal
adjustment.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 0.6
percent over the last 12 months. For the month, the index rose 0.5 percent on a not
seasonally adjusted basis. Please note that the indexes for the past 10 to 12 months
are subject to revision.

The Consumer Price Index for June 2016 is scheduled to be released on Friday,
July 15, 2016, at 8:30 a.m. (EDT).

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Brief Explanation of the CPI

The Consumer Price Index (CPI) is a measure of the average change in prices over
time of goods and services purchased by households. The Bureau of Labor Statistics
publishes CPIs for two population groups: (1) the CPI for Urban Wage Earners and
Clerical Workers (CPI-W), which covers households of wage earners and clerical workers
that comprise approximately 28 percent of the total population and (2) the CPI for All
Urban Consumers (CPI-U) and the Chained CPI for All Urban Consumers (C-CPI-U), which
covers approximately 89 percent of the total population and includes, in addition to
wage earners and clerical worker households, groups such as professional, managerial,
and technical workers, the self-employed, short-term workers, the unemployed, and
retirees and others not in the labor force.

The CPIs are based on prices of food, clothing, shelter, fuels, transportation fares,
charges for doctors’ and dentists’ services, drugs, and other goods and services that
people buy for day-to-day living. Prices are collected each month in 87 urban areas
across the country from about 6,000 housing units and approximately 24,000 retail
establishments-department stores, supermarkets, hospitals, filling stations, and other
types of stores and service establishments. All taxes directly associated with the
purchase and use of items are included in the index. Prices of fuels and a few other
items are obtained every month in all 87 locations. Prices of most other commodities
and services are collected every month in the three largest geographic areas and every
other month in other areas. Prices of most goods and services are obtained by personal
visits or telephone calls of the Bureau’s trained representatives.

In calculating the index, price changes for the various items in each location are
averaged together with weights, which represent their importance in the spending of the
appropriate population group. Local data are then combined to obtain a U.S. city average.
For the CPI-U and CPI-W separate indexes are also published by size of city, by region
of the country, for cross-classifications of regions and population-size classes, and
for 27 local areas. Area indexes do not measure differences in the level of prices among
cities; they only measure the average change in prices for each area since the base
period. For the C-CPI-U data are issued only at the national level. It is important to
note that the CPI-U and CPI-W are considered final when released, but the C-CPI-U is
issued in preliminary form and subject to two annual revisions.

The index measures price change from a designed reference date. For the CPI-U and the
CPI-W the reference base is 1982-84 equals 100. The reference base for the C-CPI-U is
December 1999 equals 100. An increase of 16.5 percent from the reference base, for
example, is shown as 116.500. This change can also be expressed in dollars as follows:
the price of a base period market basket of goods and services in the CPI has risen
from $10 in 1982-84 to $11.65.

For further details visit the CPI home page on the Internet at www.bls.gov/cpi/ or
contact our CPI Information and Analysis Section on (202) 691-7000.

Note on Sampling Error in the Consumer Price Index

The CPI is a statistical estimate that is subject to sampling error because it is based
upon a sample of retail prices and not the complete universe of all prices. BLS
calculates and publishes estimates of the 1-month, 2-month, 6-month and 12-month percent
change standard errors annually, for the CPI-U. These standard error estimates can be
used to construct confidence intervals for hypothesis testing. For example, the estimated
standard error of the 1 month percent change is 0.04 percent for the U.S. All Items
Consumer Price Index. This means that if we repeatedly sample from the universe of all
retail prices using the same methodology, and estimate a percentage change for each sample,
then 95% of these estimates would be within 0.08 percent of the 1 month percentage change
based on all retail prices. For example, for a 1-month change of 0.2 percent in the All
Items CPI for All Urban Consumers, we are 95 percent confident that the actual percent
change based on all retail prices would fall between 0.12 and 0.28 percent. For the latest
data, including information on how to use the estimates of standard error, see “Variance
Estimates for Price Changes in the Consumer Price Index, January-December 2014.” These
data are available on the CPI home page (www.bls.gov/cpi), or by using the following
link: www.bls.gov/cpi/cpivar2014.pdf

Calculating Index Changes

Movements of the indexes from one month to another are usually expressed as percent changes
rather than changes in index points, because index point changes are affected by the level
of the index in relation to its base period while percent changes are not. The example
below illustrates the computation of index point and percent changes.

Percent changes for 3-month and 6-month periods are expressed as annual rates and are
computed according to the standard formula for compound growth rates. These data indicate
what the percent change would be if the current rate were maintained for a 12-month period.

Index Point Change

CPI 202.416
Less previous index 201.800
Equals index point change .616

Percent Change

Index point difference .616
Divided by the previous index 201.800
Equals 0.003
Results multiplied by one hundred 0.003×100
Equals percent change 0.3

A Note on the Use of Seasonally Adjusted and Unadjusted Data

Introduction

The Consumer Price Index (CPI) produces both unadjusted and seasonally adjusted data.
Seasonally adjusted data are computed using seasonal factors derived by the X-13ARIMA-SEATS
Seasonal Adjustment Method. These factors are updated each February, and the new factors are
used to revise the previous five years of seasonally adjusted data. For more information on
data revisions and exceptions to the usual revision schedule, please see the Fact Sheet on
Seasonal Adjustment (http://www.bls.gov/cpi/cpisaqanda.htm) and the Timeline of Seasonal
Adjustment Methodological Changes (http://www.bls.gov/cpi/cpiseastimeline.htm).

How to Use Seasonally Adjusted and Unadjusted Data

For analyzing short-term price trends in the economy, seasonally adjusted changes are usually
preferred since they eliminate the effect of changes that normally occur at the same time and
in about the same magnitude every year—such as price movements resulting from changing
climatic conditions, production cycles, model changeovers, holidays, and sales. This allows
data users to focus on changes that are not typical for the time of year. The unadjusted data
are of primary interest to consumers concerned about the prices they actually pay. Unadjusted
data are also used extensively for escalation purposes. Many collective bargaining contract
agreements and pension plans, for example, tie compensation changes to the Consumer Price Index
before adjustment for seasonal variation. BLS advises against the use of seasonally adjusted
data in escalation agreements because seasonally adjusted series are revised annually.

Intervention Analysis

The Bureau of Labor Statistics uses Intervention Analysis Seasonal Adjustment for some CPI
series. Sometimes extreme values or sharp movements can distort the underlying seasonal pattern
of price change. Intervention Analysis Seasonal Adjustment is a process by which the distortions
caused by such unusual events are estimated and removed from the data prior to calculation of
seasonal factors. The resulting seasonal factors, which more accurately represent the seasonal
pattern, are then applied to the unadjusted data.

2016 Series Adjusted Using Intervention Analysis Seasonal Adjustment

For the seasonal factors introduced in January 2016, BLS adjusted 37 series using Intervention
Analysis Seasonal Adjustment, including selected food and beverage items, motor fuels and natural
gas. For example, this procedure was used for the Motor fuel series to offset the effects of
events such as the response in crude oil markets to the worldwide economic downturn in 2008.

Revision of Seasonally Adjusted Indexes

Seasonally adjusted data, including the U.S. city average All items index levels, are subject to
revision for up to five years after their original release. Every year, economists in the CPI
calculate new seasonal factors for seasonally adjusted series and apply them to the last five years
of data. Seasonally adjusted indexes beyond the last five years of data are considered to be final
and not subject to revision. In January 2016, revised seasonal factors and seasonally adjusted
indexes for 2011-2015 were calculated and published. For directly adjusted series, the seasonal
factors for 2015 will be applied to data in 2016 to produce the seasonally adjusted 2016 indexes.

Determining Seasonal Status

Each year the seasonal status of every series is reevaluated based upon certain statistical criteria.
Using these criteria, BLS economists determine whether a series should change its status: from “not
seasonally adjusted” to “seasonally adjusted”, or vice versa. If any of the 81 components of the U.S.
city average all items index change their seasonal adjustment status from seasonally adjusted to not
seasonally adjusted, not seasonally adjusted data will be used in the aggregation of the dependent
series for the last five years, but the seasonally adjusted indexes before that period will not be
changed. 28 of the 81 components of the U.S. city average all items index are not seasonally adjusted
for 2016.

Contact Information

For additional information on seasonal adjustment in the CPI, please write to the Bureau of Labor
Statistics, Division of Consumer Prices and Price Indexes, Washington, DC 20212 or contact Justin
Yarros, Samuel An or Marie Rogers at (202) 691-6968 or by e-mail at [email protected],
[email protected] or [email protected] If you have general questions about the CPI, please call
our information staff at (202) 691-7000.