U.S. August Consumer Price Index Report (Text)

Following is the text of the Aug. consumer prices from the Labor Department.

Consumer Price Index - August 2011

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.8 percent before seasonal adjustment.

The seasonally adjusted increase in the all items index was broad-based, with continuing increases in the indexes for gasoline, food, shelter, and apparel. The gasoline index rose for the 12th time in the last 14 months and led to a 1.2 percent increase in the energy index, while the food index rose 0.5 percent, its largest increase since March.

The index for all items less food and energy increased 0.2 percent in August, the same increase as the previous month. Shelter and apparel were the biggest contributors, though the indexes for most of its major components posted increases, including used cars and trucks, medical care, household furnishings and operations, recreation, tobacco, and personal care. The new vehicles index, unchanged for the second month in a row, was an exception.

The 12-month change in the all items index edged up to 3.8 percent after holding at 3.6 percent for three months, while the 12-month change for all items less food and energy reached 2.0 percent for the first time since November 2008. The energy index has risen 18.4 percent over the last year, while the food index has increased 4.6 percent.

Consumer Price Index Data for August 2011

Food

The food index rose 0.5 percent in August after rising 0.4 percent in July. The food at home index repeated its July increase of 0.6 percent, with five of the six major grocery store food groups rising. The only exception was the index for nonalcoholic beverages, which declined slightly in August after rising in June and July. The cereals and bakery products index rose the most, increasing 1.1 percent, followed by a 0.9 percent increase in the index for dairy and related products. The index for other food at home rose 0.8 percent as the index for sugar and sweets rose sharply. The indexes for fruits and vegetables and for meats, poultry, fish, and eggs rose 0.6 percent and 0.4 percent, respectively. The food at home index has now risen 6.0 percent over the past 12 months, with all six groups rising at least 4.0 percent. The index for food away from home advanced 0.4 percent in August, its largest increase since October 2008, and has risen 2.7 percent over the last year.

Energy

The energy index, which rose 2.8 percent in July, increased 1.2 percent in August. The gasoline index rose 1.9 percent in August after a 4.7 percent increase in July. (Before seasonal adjustment, gasoline prices fell 0.5 percent in August.) Over the past 12 months, the gasoline index has increased 32.4 percent. The household energy index rose modestly in August, increasing 0.4 percent. The indexes for electricity and for fuel oil both declined slightly, but the index for natural gas increased 2.2 percent in August after declining in July. Over the past year, the household energy index has increased 2.7 percent. The fuel oil index has risen 35.4 percent over that period, while the electricity index has risen 1.9 percent and the index for natural gas has declined, falling 2.0 percent.

All items less food and energy

The index for all items less food and energy increased 0.2 percent in August, the fifth month in a row that the increase has either been 0.2 percent or 0.3 percent. Similarly, the shelter index rose 0.2 percent in August, its fourth increase in a row of at least that size. The index for rent increased 0.4 percent in August, its largest increase since June 2008. The index for owners' equivalent rent rose 0.2 percent, and the index for lodging away from home turned down after recent increases, falling 1.8 percent. The index for apparel continued its string of substantial increases, rising 1.1 percent in August. The used cars and trucks index also continued to rise, increasing 0.9 percent. The medical care index increased 0.2 percent for the fourth month in a row, with medical care commodities rising 0.1 percent and medical care services increasing 0.3 percent. Also increasing were the indexes for household furnishings and operations (0.3 percent), airline fares (1.1 percent), recreation (0.1 percent), personal care (0.2 percent), and tobacco (0.5 percent). The index for new vehicles was unchanged for the second month in a row after a series of increases.

The index for all items less food and energy has risen 2.0 percent in the last 12 months. This 12-month change has been trending up since reaching a low of 0.6 percent for the 12 months ending October 2010. The 12-month change in the shelter index, which was negative through much of 2010, reached 1.6 percent in August. The 12-month change in the apparel index has now reached 4.2 percent after being negative as recently as March of this year. Major transportation indexes have risen strongly over the last 12 months, including used cars and trucks (5.4 percent), new vehicles (3.8 percent) and airline fares (9.5 percent).

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased 3.8 percent over the last 12 months to an index level of 226.545 (1982-84=100). For the month, the index increased 0.3 percent prior to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.3 percent over the last 12 months to an index level of 223.326 (1982-84=100). For the month, the index increased 0.3 percent prior to seasonal adjustment.

The Chained Consumer Price Index for All Urban Consumers (C- CPI-U) increased 3.6 percent over the last 12 months. For the month, the index increased 0.3 percent on a not seasonally adjusted basis. Please note that the indexes for the post-2009 period are subject to revision.

The Consumer Price Index for September 2011 is scheduled to be released on Wednesday, October 19, 2011, at 8:30 a.m. (EDT).

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 each month in 87 urban areas across the country from about 4,000 housing units and approximately 26,000 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.

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

201.8 Equals index point change

0.616

Percent Change

Index point difference

0.616 Divided by the previous index

201.8 Equals

0.003 Results multiplied by one hundred 0.003x100 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 2006 through December 2010 were replaced in January 2011. 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.

Effective with the publication of data from January 2006 through December 2010 in January 2011, the Video and audio series and the Information technology, hardware and services series were changed from independently adjusted to dependently adjusted. This resulted in an increase in the number of seasonal components used in deriving seasonal movement of the All items and 54 other lower level aggregations, from 73 for the publication of January 1998 through December 2005 data to 82 for the publication of seasonally adjusted data for January 2006 and later. Each year the seasonal status of every series is reevaluated based upon certain statistical criteria. If any of the 82 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 before that period will not be changed. Note: 37 of the 82 components are not seasonally adjusted for 2011.

Seasonally adjusted data, including the all items index levels, are subject to revision for up to five years after their original release. For this reason, BLS advises against the use of these data in escalation agreements.

Effective with the calculation of the seasonal factors for 1990, the Bureau of Labor Statistics has used an enhanced seasonal adjustment procedure called Intervention Analysis Seasonal Adjustment for some CPI series. Intervention Analysis Seasonal Adjustment allows for better estimates of seasonally adjusted data. Extreme values and/or sharp movements which might distort the seasonal pattern are estimated and removed from the data prior to calculation of seasonal factors. Beginning with the calculation of seasonal factors for 1996, X-12-ARIMA software was used for Intervention Analysis Seasonal Adjustment.

For the seasonal factors introduced in January 2011, BLS adjusted 29 series using Intervention Analysis Seasonal Adjustment, including selected food and beverage items, motor fuels, electricity and vehicles. For example, this procedure was used for the Motor fuel series to offset the effects of events such as damage to oil refineries from Hurricane Katrina.

For a complete list of Intervention Analysis Seasonal Adjustment series and explanations, please refer to the article "Intervention Analysis Seasonal Adjustment", located on our website at http://www.bls.gov/cpi/cpisapage.htm.

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 David Levin at (202) 691-6968, or by e-mail at Levin.David@bls.gov. If you have general questions about the CPI, please call our information staff at (202) 691-7000.

To contact the reporter on this story: Kristy Scheuble in Washington kmckeaney@bloomberg.net

To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net