Macroeconomics

In 2015 Consumer Price Index was pulled up by cost of shelter and health care.

Consumer Price Index was pulled up by cost of shelter and health care this past January of 2016. Although low prices in energy offsetted most of the increases, inflation reached 1.4 percent over the last year. Core inflation, which is all items less food and energy, continues to be on expected levels of 2.2 annualized percent change. The Bureau of Labor Statistics informed that “this is the highest 12-months change since the period ending June 2012, and exceeds the 1.9 percent average annualized increase over the last ten years.

Energy prices continue to push down inflation:

Energy prices continue to push deflationary forces in the Consumer Price Index. In January 2016, Energy Index fell 2.8 percent when compared to December 2015. Gasoline itself declined 4.8 percent making the entire fuel oil index fell 6.5 percent for the first month of the year. Natural gas also decreased 0.6 percent as electricity did so by 0.7 percent. Not only oil prices are to blame for the decline in the energy index, but also the mild weather the nation has had this winter thus far.

Although the food index was unchanged for the month of January 2016, food items such as meat, poultry, fish, and eggs made the six major grocery stores index to decline 1.3 percent. These items’ declining trends were offset by 1.3 percent increase in fresh vegetables and fruits. Annualized measures indicated that meats, poultry, fish and eggs prices have fallen 3.5 percent while dairy products have done so also by 3.0 percent. And again, those price gains for the consumer’s wallet were mostly counterbalanced by fresh vegetables and fruits prices which have risen 2.7 percent during the last 12 months.

Shelter and Medical Care:

The index for shelter increased 3.2 as the index for medical care rose by 3.0 percent. Moving became ten percent more expensive than it was at the beginning of 2015. The rent of primary residence also increased above all items index level to 3.7 percent over the year.

Shelter Price Index - January 2016.

Shelter Price Index – January 2016.

Brief Explanation of the CPI. Taken from the US Bureau of Labor Statistics.
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.

Categories: Macroeconomics

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