Consumer Price Index Registers First Decline Since 2009

Written by: John Landers

The U.S. Bureau of Labor Statistics reports the main component of the Consumer Price Index or All Urban Consumers (CPI-U) fell 0.3 percent in May 2012, on a seasonally adjusted basis. Prior to making any seasonal adjustment, the CPI-U, sometimes called the all items index because it represents the broadest and most comprehensive measurement of price changes, rose 1.7 percent over the last year.

According to the Labor Department, “seasonally adjusted data” enables individual who use the figures to identify the primary trend of short-term prices as compared to deciphering the underlying direction of prices from raw data. The decreased in the all items index was led by the energy index, which declined 4.3 percent (seasonally adjusted) in May. The 6.8 percent decrease in the gasoline index drove the decline in the energy component.

Other changes recorded in the CPI for May include the following components:

Food index………………………. No change

Natural gas………………………. -4.1%

Fuel oil……………………………. -2.8%

Electricity…………………………    0.3%

Transportation services……      0.2%

For the third consecutive month, the component for all items less food and energy—the Core Index— increased 0.2 percent in May. Similar to April, the following components contributed to the increase: shelter (.2 percent), medical care (.5 percent), new vehicles (.2 percent), used cars and trucks (1 percent) and apparel (.4 percent). The tobacco, operations and household furnishing indexes all decreased in May.

Economists and policy makers track the Core Index, which excludes volatile data for food and energy prices, to determine the “underlying” rate of inflation.

All Items Index in Steady Decline

Since the CPI-U index reached its latest peak of 3.9 percent in September 2011, it has trended lower due mainly to a decline in the energy index. The 1.7 percent change recorded in May represents the first time the index has declined on an annual basis since October 2009. The food index reached 4.7 percent, on an annual basis, in December.

In May, the food index showed a 2.8 percent 12-month change. All items less food and energy decreased 2.3 percent over a 12-month period in May—the percentage rate for the previous two months.

Collection and Evaluation Process

The Bureau of Labor Statistics (BLS) has economic assistants (data collectors) call or visit  thousand of  operations across urban areas, including  service businesses, retail stores, rental units and doctor’s offices to gather data on the prices of around 80,000 items the  BLS rely on to follow and measure price changes affecting the Consumer Price Index. The items represent a “scientifically selected sample of the prices paid by consumers for goods and services purchased,” according to the BLS.

During each call or visit, data collectors for the components of the Consumer Price Index gather figures on a certain good or service specifically classified during a prior call or visit. For available items, economic assistants record price data. When a good or service has changed in quantity, quality or is no longer available, the assistant either records the quality change in the current item or chooses a new item.


Consumer Price Index Registers First Decline...

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