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

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

Consumer Price Index - October 2011

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.5 percent before seasonal adjustment.

A decline in the energy index more than offset small increases in the indexes for food and all items less food and energy to create the all items decline. The energy index turned down in October after increasing in each of the three previous months as the gasoline and household energy indexes declined after a series of seasonally adjusted increases. The food index rose in October, but posted its smallest increase of the year as the fruits and vegetables index declined sharply.

The index for all items less food and energy increased 0.1 percent in October; this was the same increase as last month and matches its smallest increase of the year. While the shelter and medical care indexes accelerated in October and the apparel index turned up, the indexes for new vehicles, used cars and trucks, airline fare, and recreation all declined.

The all items index has risen 3.5 percent over the last 12 months, a lower figure than last month's 3.9 percent increase, as the 12-month change in the energy index fell from 19.3 to 14.2 percent. In contrast, the 12-month change for all items less food and energy edged up from 2.0 to 2.1 percent. The food index 12-month change was 4.7 percent, the same figure as in September.

Consumer Price Index Data for October 2011

Food

The food index decelerated in October, rising 0.1 percent after rising 0.4 percent in September. The food at home index, which had risen 0.6 percent in each of the last three months, rose 0.1 percent in October. The deceleration was largely due to the fruits and vegetables group, which fell 1.7 percent as the indexes for fresh fruits and fresh vegetables both declined sharply. The other five major grocery store food groups all posted modest increases. The indexes for nonalcoholic beverages rose 0.5 percent, as did the index for meats, poultry, fish, and eggs. The indexes for cereals and bakery products and for other food at home both rose 0.4 percent, while the index for dairy and related products increased 0.1 percent. The food at home index has risen 6.2 percent over the past 12 months with all six major groups up between 4.9 percent (nonalcoholic beverages) and 9.0 percent (dairy and related products). The index for food away from home advanced 0.2 percent in October and has risen 2.7 percent over the past 12 months.

Energy

The energy index fell 2.0 percent in October following a 2.0 percent increase in September. The gasoline index, up 2.9 percent in September, fell 3.1 percent in October. (Before seasonal adjustment, gasoline prices fell 4.3 percent in October.) Despite the October decline, the gasoline index has risen 23.5 percent over the past 12 months. The household energy index also declined in October, falling 0.3 percent. The electricity index rose 0.4 percent, but this increase was more than offset by a 3.0 percent decline in the index for natural gas and a 0.5 percent decrease in the fuel oil index. The household energy index has risen 3.1 percent over the last 12 months. The fuel oil index has risen 26.8 percent and the electricity index has increased 2.9 percent, while the index for natural gas has declined 2.2 percent.

All items less food and energy

The index for all items less food and energy increased 0.1 percent in October, the same increase as in September. The shelter index, which rose 0.1 percent in September, increased 0.2 percent in October. The rent index rose 0.4 percent in October after a 0.2 percent increase in September, while the index for owners' equivalent rent rose 0.2 percent in October after a 0.1 percent increase in September. These increases more than offset the third consecutive decline in the index for lodging away from home, which fell 1.7 percent in October. The medical care index, which rose 0.2 percent in September, increased 0.5 percent in October. The index for medical care commodities rose 0.3 percent and the medical care services index rose 0.5 percent with the indexes for hospital services rising 0.7 percent and the physicians' services index increasing 0.5 percent. The indexes for household furnishings and operations and personal care posted slight increases in October. In contrast to these increases, the index for new vehicles declined in October, falling 0.3 percent after being unchanged for three months in row, and the index for used cars and trucks fell 0.6 percent, while the indexes for recreation and for airline fares posted slight declines.

The index for all items less food and energy has increased 2.1 percent over the last 12 months. Indexes with larger 12-month increases include airline fares (9.6 percent), used cars and trucks (5.2 percent), education (4.7 percent), apparel (4.2 percent), new vehicles (3.4 percent), and medical care (3.1 percent). Indexes with smaller increases include shelter (1.8 percent) and recreation (0.3 percent), while the communication index declined (-1.8 percent).

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased 3.5 percent over the last 12 months to an index level of 226.421 (1982-84=100). For the month, the index declined 0.2 percent prior to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 3.9 percent over the last 12 months to an index level of 223.043 (1982-84=100). For the month, the index declined 0.3 percent prior to seasonal adjustment.

The Chained Consumer Price Index for All Urban Consumers (C- CPI-U) increased 3.4 percent over the last 12 months. For the month, the index decreased 0.2 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 November 2011 is scheduled to be released on Friday, December 16, 2011, at 8:30 a.m. (EST).

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.

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 0.03 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 0.06 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 0.14 and 0.26 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 2010". These data are available on the CPI home page (http://www.bls.gov/cpi), or by using the following link http://www.bls.gov/cpi/cpivar2010.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 201.8 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.

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

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