EconoIndicators

CPI At a Glance

• CPI-U: 210.228
• Monthly Change: Down 1%
• Year-to-year Change: Up 0.1%
• Core CPI-U: Up 1.8% [Seasonally adjusted]
• CPI-W: 204.813
• Monthly Change: Down 1.2%
• Year-to-year Change: Down 0.5%
• Chained CPI-U: 120.661
• Monthly Change: Down 1.3%
• Year-to-Year Change: Down 0.5%

Important notes: Numbers are not seasonally adjusted unless noted; base year=100 for CPI-U and CPI-W is 1982-1984; base year for C-CPI-U is 1999.

Technorati Tags: Consumer, Price, Index, CPI, inflation

CONSUMER PRICE INDEX: DECEMBER 2008

The Consumer Price Index for All Urban Consumers (CPI-U) decreased
1.0 percent in December, before seasonal adjustment, the Bureau of Labor
Statistics of the U.S. Department of Labor reported today. The December
level of 210.228 (1982-84=100) was 0.1 percent higher than in December
2007.

The Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) decreased 1.2 percent in December, prior to seasonal adjustment.
The December level of 204.813 (1982-84=100) was 0.5 percent lower than in
December 2007.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U)
decreased 1.3 percent in December on a not seasonally adjusted basis. The
December level of 120.661 (December 1999=100) was 0.5 percent lower than
in December 2007. Please note that the indexes for the post-2006 period
are subject to revision.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U decreased 0.7 percent in
December, the third consecutive decline. The index is now only 0.1
percent higher than in December 2007. Declining energy prices,
particularly for gasoline, again drove most of the decline. The energy
index declined 8.3 percent in December. Within energy, the gasoline index
fell 17.2 percent and accounted for almost 90 percent of the decrease in
the all items index. The index for household energy declined 0.7 percent.
Excluding energy, the index was virtually unchanged for the third straight
month. The food index declined 0.1 percent in December, the first (cont.)

Table A. Percent changes in CPI for All Urban Consumers (CPI-U)

Seasonally adjusted

Expenditure Compound
Category Changes from preceding month annual Un-
rate adjusted
3-mos. 12-mos.
June July Aug. Sep. Oct. Nov. Dec. ended ended
2008 2008 2008 2008 2008 2008 2008 Dec. 2008 Dec. 2008

All items………. 1.1 .8 -.1 .0 -1.0 -1.7 -.7 -12.7 .1
Food and beverages .7 .9 .6 .6 .3 .2 .0 1.7 5.8
Housing……….. .5 .6 -.1 -.1 .0 -.1 .0 -.7 2.4
Apparel……….. .1 1.2 .5 -.1 -1.0 .3 -.9 -6.4 -1.0
Transportation…. 3.8 1.7 -1.5 -.6 -5.4 -9.8 -4.4 -55.6 -13.3
Medical care…… .2 .1 .2 .3 .2 .2 .3 2.8 2.6
Recreation…….. .1 .4 .5 .2 .1 .0 -.2 -.4 1.8
Education and
communication.. .5 .5 .2 .1 .2 .2 .3 3.0 3.6
Other goods and
services……. .4 .4 .2 .2 .3 .0 .0 .8 3.4
Special indexes:
Energy………… 6.6 4.0 -3.1 -1.9 -8.6 -17.0 -8.3 -76.6 -21.3
Food………….. .8 .9 .6 .6 .3 .2 -.1 1.4 5.9
All items less
food and energy .3 .3 .2 .1 -.1 .0 .0 -.3 1.8

decrease since April 2006, as many meat, dairy, fruit, and vegetable
indexes decreased. The index for all items excluding food and energy was
virtually unchanged in December. Continuing decreases in the indexes for
lodging away from home, airline fare, and new and used motor vehicles,
along with downturns in the indexes for apparel and recreation, offset
increases in other indexes including rent and owners’ equivalent rent,
medical care, and education.

For the 12 month period ending December 2008, the CPI-U rose 0.1
percent. This was the smallest calendar year increase since a 0.7 percent
decline in 1954 and compares with a 4.1 percent increase for the 12 months
ended December 2007. Consumer prices declined at a seasonally adjusted
annualized rate (SAAR) of 12.7 percent in the fourth quarter of 2008.
This followed increases during the first three quarters at rates of 3.1,
7.9, and 2.6 percent, respectively. The index for energy declined at a
SAAR of 76.6 percent during the fourth quarter and fell 21.3 percent for
the 12 months ending December after rising 17.4 percent during 2007.
Petroleum-based energy prices declined 40.5 percent during 2008 while
prices for energy services rose 7.7 percent. The food index rose 5.9
percent in 2008 compared to 4.9 percent in 2007, with grocery store food
prices rising 6.6 percent in 2008 compared to 5.6 percent in 2007. In
both cases, the 2008 increases were the largest since 1980. Among the
grocery store food groups, the 2008 increases ranged from a low of 2.7
percent for dairy and related products to a high of 11.7 percent for
cereals and bakery products.

Excluding food and energy, the CPI declined at a 0.3 percent SAAR
during the last quarter of 2008, after increasing at rates of 2.0, 2.5,
and 2.7 percent during the first three quarters, respectively. The 1.8
percent increase for all of 2008 compares to 2.4 percent during 2007 and
is the smallest one-year increase since 2003. The smaller increase
reflects slower advances in prices for shelter and medical care as well as
a decline in the price of new and used motor vehicles. Shelter costs rose
1.9 percent in 2008 after increasing 3.1 percent in 2007, while medical
care prices rose 2.6 percent in 2008 after increasing 5.2 percent in 2007.
Prices for new and used motor vehicles declined 3.5 percent during 2008
after being virtually unchanged during 2007. The annual rates for
selected groups for the last eight years are shown below.

Percentage change 12 months
ended in December

2001 2002 2003 2004 2005 2006 2007 2008

All items……….. 1.6 2.4 1.9 3.3 3.4 2.5 4.1 .1
Food and beverages 2.8 1.5 3.5 2.6 2.3 2.2 4.8 5.8
Housing………… 2.9 2.4 2.2 3.0 4.0 3.3 3.0 2.4
Apparel………… -3.2 -1.8 -2.1 -.2 -1.1 .9 -.3 -1.0
Transportation….. -3.8 3.8 .3 6.5 4.8 1.6 8.3 -13.3
Medical care……. 4.7 5.0 3.7 4.2 4.3 3.6 5.2 2.6
Recreation……… 1.5 1.1 1.1 .7 1.1 1.0 .8 1.8
Education and
communication….. 3.2 2.2 1.6 1.5 2.4 2.3 3.0 3.6
Other goods and
services………. 4.5 3.3 1.5 2.5 3.1 3.0 3.3 3.4
Special indexes:
Energy…………. -13.0 10.7 6.9 16.6 17.1 2.9 17.4 -21.3
Energy commodities -24.5 23.7 6.9 26.7 16.7 6.1 29.4 -40.5
Energy services… -1.5 .4 6.9 6.8 17.6 -.6 3.4 7.7
All items less
energy………… 2.8 1.8 1.5 2.2 2.2 2.5 2.8 2.4
Food………….. 2.8 1.5 3.6 2.7 2.3 2.1 4.9 5.9
All items less food
and energy…….. 2.7 1.9 1.1 2.2 2.2 2.6 2.4 1.8

The food and beverages index was virtually unchanged in December, as
increases in the indexes for food away from home and alcoholic beverages
offset a 0.4 percent decline in the food at home index. Within food at
home, the indexes for three of the six major grocery store food groups
declined. The fruits and vegetables index declined 2.4 percent in
December, the fourth consecutive decrease, with fresh vegetables down 4.4
percent. The index for dairy and related products turned down in
December, falling 0.9 percent after rising 0.4 percent in November. For
the year, the indexes for fruits and vegetables and for dairy and related
products rose 3.4 percent and 2.7 percent, respectively. The index for
meats, poultry, fish and eggs declined 0.5 percent in December, but was up
5.1 percent for the year. The December decrease was driven by a 6.6
percent decline in the index for eggs. The indexes for cereals and bakery
products and for other food at home both increased in December. The
former index rose 0.3 percent in December and posted an 11.7 percent 12
month increase, while the latter climbed 0.6 percent and was up 9.3
percent for the year. The index for nonalcoholic beverages was virtually
unchanged in December and has increased 5.9 percent since December 2007.
The index for food away from home advanced 0.3 percent in December while
the alcoholic beverages index increased 0.6 percent.

The index for housing was virtually unchanged in December after
declining 0.1 percent in November. The shelter index, which rose 0.2
percent in November, was also virtually unchanged. Increases in the
indexes for rent and owners’ equivalent rent of 0.2 percent and 0.1
percent, respectively, offset a 0.7 percent decline in the index for
lodging away from home. For the 12 months ending December, the housing
index rose 2.4 percent, with the index for shelter increasing 1.9 percent.
The household energy index declined 0.7 percent in December, but
registered a 5.9 percent increase over the last 12 months. Within
household energy, the index for fuel oil declined sharply, down 12.7
percent in December and 21.0 percent over the last year. The natural gas
index declined 1.6 percent but was up 5.5 percent during 2008. The
electricity index increased in December, rising 0.6 percent to a level 8.6
percent above a year ago. The index for household furnishings and
operations increased 0.1 percent in December.

The transportation index fell 4.4 percent in December as several of
its major components continue to decline. This was the fifth consecutive
monthly decrease and the index is now down 13.3 percent over the past
year. The motor fuel index decreased 16.8 percent in December. (Before
seasonal adjustment, motor fuel prices fell 20.3 percent in December and
were 42.2 percent below their December 2007 level) The index for new and
used motor vehicles fell for the fifth straight month, declining 0.4
percent. The new vehicles index declined 0.4 percent and the index for
used cars and trucks fell 0.8 percent. The index for public
transportation declined 1.3 percent in December as the airline fare index
decreased 1.2 percent. This was the fourth straight decline in the
airline fare index, but it was still 1.4 percent higher than in December
2007.

The index for apparel turned down in December, declining 0.9 percent
after rising 0.3 percent in November. Prior to seasonal adjustment,
apparel prices fell 3.5 percent, and are 1.0 percent below their December
2007 level.

The index for medical care rose 0.3 percent in December after
increasing 0.2 percent in November, and is up 2.6 percent over the past
year. The medical care commodities index increased 0.5 percent, with the
index for nonprescription drugs and medical supplies rising 1.1 percent.
The index for medical care services advanced 0.2 percent in December after
rising 0.1 percent in November. The physicians’ services index increased
0.4 percent and the index for hospital and related services rose 0.5
percent.

After being virtually unchanged in November, the index for recreation
declined 0.2 percent in December. Decreases in the indexes for sporting
goods, for photography, and for toys contributed to the decline. The
index for video and audio, which fell 0.1 percent in November, increased
0.1 percent in December. The recreation index has increased 1.8 percent
over the past year.

The index for education and communication rose 0.3 percent in
December after advancing 0.2 percent in November and has risen 3.6 percent
over the past year. The index for education increased 0.5 percent in
December and the index for communication rose 0.2 percent. Within the
latter group, the telephone services index increased 0.1 percent and the
index for information technology, hardware and services rose 0.4 percent.

The index for other goods and services was virtually unchanged for
the second consecutive month and rose 3.4 percent during all of 2008. The
index for tobacco and smoking products rose 0.5 percent in December after
being virtually unchanged in November. The index for personal care turned
down in December, falling 0.2 percent after being virtually unchanged in
November.

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

On a seasonally adjusted basis, the CPI for Urban Wage Earners and
Clerical Workers decreased 0.9 percent in December.

Table B. Percent changes in CPI for Urban Wage Earners and
Clerical Workers (CPI-W)

Seasonally adjusted

Expenditure Compound
Category Changes from preceding month annual Un-
rate adjusted
3-mos. 12-mos.
June July Aug. Sep. Oct. Nov. Dec. ended ended
2008 2008 2008 2008 2008 2008 2008 Dec. 2008 Dec. 2008

All items………. 1.2 .9 -.2 -.1 -1.2 -2.1 -.9 -15.7 -.5
Food and beverages .8 .9 .6 .6 .3 .2 .0 1.8 5.9
Housing……….. .5 .7 .0 -.2 .0 -.1 .0 -.2 2.8
Apparel……….. .0 .8 1.0 .0 -1.2 .2 -1.0 -7.7 -.9
Transportation…. 4.0 1.8 -1.7 -.7 -6.0 -10.9 -5.0 -59.8 -15.3
Medical care…… .2 .1 .3 .3 .1 .2 .3 2.6 2.7
Recreation…….. .2 .4 .5 .2 .0 -.1 -.2 -.8 1.6
Education and
communication.. .5 .5 .2 .0 .2 .2 .3 2.8 3.4
Other goods and
services……. .6 .5 .2 .2 .3 .1 .1 1.8 4.1
Special indexes:
Energy………… 6.8 4.0 -3.2 -1.7 -9.0 -17.8 -8.7 -78.2 -22.6
Food………….. .8 .9 .6 .6 .3 .2 -.1 1.5 6.0
All items less
food and energy .3 .3 .2 .1 -.1 .0 .0 -.3 1.7

Consumer Price Index data for January are scheduled for release on
Friday, February 20, 2009, at 8:30 A.M. (EST).

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.

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 32 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 cover approximately 87 percent of the total population and
include 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, and 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 in 87 urban areas across the country from about
50,000 housing units and approximately 23,000 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 100.0. 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 116.5. 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
http://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 0.06 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 0.12 percent of the 1 month percentage change
based on all retail prices. 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
0.08 and 0.32 percent. For the latest data, including information on how
to use the estimates of standard error, see “Variance Estimates for
Changes in the Consumer Price Index, January 2005- December 2005″ in the
CPI Detailed Report, February 2006. These data are available on the CPI
home page (http://www.bls.gov/cpi), using the following link
http://www.bls.gov/cpi/cpivar2006.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

Regions Defined

The states in the four regions shown in Tables 3 and 6 are listed below.

The Northeast–Connecticut, Maine, Massachusetts, New Hampshire, New York,
New Jersey, Pennsylvania, Rhode Island, and Vermont.
The Midwest–Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota,
Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.
The South–Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky,
Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina,
Tennessee, Texas, Virginia, West Virginia, and the District of Columbia.
The West–Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana,
Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

A Note on Seasonally Adjusted and Unadjusted Data

Because price data are used for different purposes by different
groups, the Bureau of Labor Statistics publishes seasonally adjusted as
well as unadjusted changes each month.

For analyzing general 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.

The unadjusted data are of primary interest to consumers concerned
about the prices they actually pay. Unadjusted data also are 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.

Seasonal factors used in computing the seasonally adjusted indexes
are derived by the X-12-ARIMA Seasonal Adjustment Method. Seasonally
adjusted indexes and seasonal factors are computed annually. Each year,
the last 5 years of seasonally adjusted data are revised. Data from
January 2003 through December 2007 were replaced in January 2008.
Exceptions to the usual revision schedule were: the updated seasonal data
at the end of 1977 replaced data from 1967 through 1977; and, in January
2002, dependently seasonally adjusted series were revised for January 1987-
December 2001 as a result of a change in the aggregation weights for
dependently adjusted series. For further information, please see
“Aggregation of Dependently Adjusted Seasonally Adjusted Series,” in the
October 2001 issue of the CPI Detailed Report.

The seasonal movement of All items and 54 other aggregations is
derived by combining the seasonal movement of 73 selected components.
Each year the seasonal status of every series is reevaluated based upon
certain statistical criteria. If any of the 73 components 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 5 years, but the seasonally adjusted
indexes will be used before that period. Note: 48 of the 73 components
are seasonally adjusted for 2008.

Consumer Price Index (CPI) - December 2008 [PDF]

Source: Department of Labor, Bureau of Labor Statistics