Transmission of material in this release is embargoed until 8:30 a.m. (EST) Wednesday, December 17, 2014 USDL-14-2248 Technical information: (202) 691-7000 Reed.Steve@bls.gov www.bls.gov/cpi Media Contact: (202) 691-5902 PressOffice@bls.gov CONSUMER PRICE INDEX - NOVEMBER 2014 The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.3 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.3 percent before seasonal adjustment. The gasoline index posted its sharpest decline since December 2008 and was the main cause of the decrease in the seasonally adjusted all items index. The indexes for fuel oil and natural gas also declined, and the energy index fell 3.8 percent. The food index rose 0.2 percent with major grocery store food groups mixed. The index for all items less food and energy increased 0.1 percent in November. The shelter index rose 0.3 percent, and the indexes for medical care, airline fares, and alcoholic beverages also rose. In contrast, the indexes for apparel, used cars and trucks, recreation, household furnishings and operations, personal care, and new vehicles all declined in November. The all items index increased 1.3 percent over the last 12 months, a notable decline from the 1.7 percent figure from the 12 months ending October. The index for all items less food and energy has increased 1.7 percent over the last 12 months, compared to 1.8 percent for the 12 months ending October. The food index has risen 3.2 percent over the span. However, the energy index has declined 4.8 percent over the past 12 months, with the gasoline and fuel oil indexes both falling over 10 percent. Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city average Seasonally adjusted changes from preceding month Un- adjusted 12-mos. May June July Aug. Sep. Oct. Nov. ended 2014 2014 2014 2014 2014 2014 2014 Nov. 2014 All items.................. .4 .3 .1 -.2 .1 .0 -.3 1.3 Food...................... .5 .1 .4 .2 .3 .1 .2 3.2 Food at home............. .7 .0 .4 .2 .3 .1 .1 3.4 Food away from home (1).. .2 .2 .3 .2 .3 .2 .4 2.9 Energy.................... .9 1.6 -.3 -2.6 -.7 -1.9 -3.8 -4.8 Energy commodities....... .6 3.0 -.3 -3.9 -1.1 -3.0 -6.4 -10.2 Gasoline (all types).... .7 3.3 -.3 -4.1 -1.0 -3.0 -6.6 -10.5 Fuel oil (1)............ -1.4 -1.7 -.7 -1.2 -2.1 -4.0 -3.5 -10.1 Energy services.......... 1.4 -.4 -.4 -.6 -.2 -.2 -.3 2.9 Electricity............. 2.3 .2 -.3 .1 -.7 .5 .1 2.8 Utility (piped) gas service.............. -1.7 -2.6 -.4 -2.8 1.6 -2.7 -1.7 3.2 All items less food and energy................. .3 .1 .1 .0 .1 .2 .1 1.7 Commodities less food and energy commodities.... .1 .1 .0 -.1 .0 .0 -.4 -.5 New vehicles............ .2 -.3 .3 .2 .0 .2 -.1 .6 Used cars and trucks.... -.1 -.4 -.3 -.3 -.1 -.9 -1.2 -3.1 Apparel................. .3 .5 .2 -.2 .0 -.2 -1.1 -.3 Medical care commodities .5 .7 .3 -.1 .5 .0 .6 3.1 Services less energy services.............. .3 .1 .1 .0 .2 .3 .2 2.5 Shelter................. .3 .2 .3 .2 .3 .2 .3 3.0 Transportation services 1.0 .1 -.7 -.6 .1 .8 .3 1.8 Medical care services... .3 .0 .1 .0 .1 .2 .4 2.3 1 Not seasonally adjusted. Consumer Price Index Data for November 2014 Food The food index rose 0.2 percent in November after increasing 0.1 percent in October. The index for food at home rose 0.1 percent in November and has risen 3.4 percent over the past year. Indexes for major grocery store food groups were mixed in November, with three increases and three declines. The index for meats, poultry, fish, and eggs increased 0.6 percent in November after declining in October. The index for beef and veal rose 0.8 percent, its tenth consecutive increase. The index for nonalcoholic beverages rose 0.5 percent, and the index for other food at home increased 0.4 percent. In contrast, the fruits and vegetables index turned down, falling 0.7 percent in November after a 0.9 percent increase in October. The index for fresh vegetables rose 1.8 percent, but the fresh fruits index fell 2.9 percent. The indexes for dairy and related products and for cereals and bakery products both fell 0.2 percent. All six groups increased over the past 12 months, with increases ranging from 0.2 percent (cereals and bakery products) to 9.1 percent (meats, poultry, fish, and eggs.) The index for food away from home increased 0.4 percent in November, its largest increase since January 2012, and has risen 2.9 percent over the past year. Energy The energy index declined for the fifth month in a row, falling 3.8 percent in November. The gasoline index continued to decrease sharply, falling 6.6 percent. (Before seasonal adjustment, gasoline prices fell 8.9 percent in November.) The fuel oil index fell 3.5 percent in November, its ninth consecutive decline. The gasoline index has fallen 10.5 percent over the last 12 months, and the fuel oil index has declined 10.1 percent. The index for natural gas also declined in November, decreasing 1.7 percent, but it has risen 3.2 percent over the last year. Electricity was the only major component index to rise in November; it increased 0.1 percent and has risen 2.8 percent over the past year. All items less food and energy The index for all items less food and energy rose 0.1 percent in November following a 0.2 percent increase in October. The shelter index rose 0.3 percent, with the rent index rising 0.3 percent and the index for owners' equivalent rent increasing 0.2 percent. The index for lodging away from home was unchanged in November. The index for medical care rose 0.4 percent in November, its largest increase since August 2013. The index for prescription drugs rose 0.6 percent, while the physicians' services index increased 0.5 percent. The airline fares index increased 1.4 percent after a 2.4 percent increase in October. The index for alcoholic beverages rose as well, increasing 0.8 percent. In contrast to these increases, the apparel index fell 1.1 percent and the index for used cars and trucks declined 1.2 percent. Several indexes posted more modest declines; the indexes for recreation, for household furnishings and operations, and for personal care all declined 0.2 percent, and the new vehicles index fell 0.1 percent. The index for all items less food and energy has risen 1.7 percent over the last 12 months. The shelter index rose 3.0 percent over that span, and the index for medical care increased 2.5 percent. Several indexes have declined over the last 12 months, including airline fares, used cars and trucks, household furnishings and operations, and recreation. Not seasonally adjusted CPI measures The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.3 percent over the last 12 months to an index level of 236.151 (1982-84=100). For the month, the index fell 0.5 percent prior to seasonal adjustment. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 1.1 percent over the last 12 months to an index level of 231.551 (1982-84=100). For the month, the index fell 0.7 percent prior to seasonal adjustment. The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 1.0 percent over the last 12 months. For the month, the index fell 0.7 percent on a not seasonally adjusted basis. Please note that the indexes for the post-2012 period are subject to revision. The Consumer Price Index for December 2014 is scheduled to be released on Friday, January 16, 2015, at 8:30 a.m. (EST). Chained Consumer Price Index to be Revised Quarterly Effective with the release of CPI data for January 2015 on February 26, 2015, the Bureau of Labor Statistics will begin quarterly revisions of the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). In addition, a Constant Elasticity of Substitution (CES) formula will replace the geometric mean formula for the calculation of Initial and Interim C-CPI-U indexes. More frequent weight updates and index revisions. Whereas CPI-U and CPI-W indexes are considered final when released, the final C-CPI-U index is published with a lag for administration and processing of Consumer Expenditure Survey household data, the source of the final C-CPI-U monthly expenditure weights. Under the traditional annual revision process, the final C-CPI-U index was published 13 to 24 months after the CPI-U. The CPI program is implementing a new estimation system that calculates monthly expenditure weights and revised C-CPI-U indexes on a quarterly basis. Under the new quarterly process, the final C-CPI-U index will lag the CPI-U index by 10 to 12 months. Final C-CPI-U indexes for 2014 will be published on the following quarterly schedule: Index Month Release Month January 2013 - March 2014 February 2015 April - June 2014 May 2015 July - September 2014 August 2015 October - December 2014 November 2015 Initial C-CPI-U indexes will continue to be released concurrent with the CPI-U release, and will be updated as interim C-CPI-U indexes with every quarterly revision until the final version is published. New formula for initial and interim C-CPI-U Indexes. The CES formula will replace the geometric mean formula for initial and interim C-CPI-U indexes effective with the February 26, 2015 release. The CES formula is an improvement over the geometric mean formula because the CES formula more closely models consumer substitution behavior. With the use of the geometric mean formula, consumers are assumed to consistently substitute within item classification to goods whose prices are falling relative to others. Using a fixed quantity formula, such as a Laspeyres formula, consumers are assumed to make no substitutions between goods when faced with relative price change. In reality, consumers respond to relative price changes differently than either model implies. The CES formula attempts to capture the amount of substitution occurring in the marketplace as consumers respond to changing relative prices. For further details on the implementation of the CES formula and the frequency of weight updates for the C-CPI-U, please contact the CPI Information and Analysis section at (202) 691-6966. New Estimation System Effective with the release of the January 2015 CPI on February 26, 2015, the Bureau of Labor Statistics will utilize a new estimation system for the Consumer Price Index. The new estimation system, the first major improvement to the existing system in over 25 years, is a redesigned, state-of-the-art system with improved flexibility and review capabilities. For more information on this new system, please see http://www.bls.gov/cpi/cpinewest.htm. 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 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, 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. 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 0.04 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 0.08 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 0.12 and 0.28 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 2013". 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/cpivar2013.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 0.003x100 Equals percent change 0.3 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-13ARIMA-SEATS Seasonal Adjustment Method. Seasonally adjusted indexes and seasonal factors are computed annually. Each year, the last five years of seasonally adjusted data are revised. Data from January 2009 through December 2013 were replaced in January 2014. 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 64 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 five years, but the seasonally adjusted indexes before that period will not be changed. Note: 35 of the 82 components are not seasonally adjusted for 2014. 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. In 2014, for the 2009-2013 revisions, the Bureau of Labor Statistics began using X-13ARIMA-SEATS to perform the seasonal adjustment of CPI series, including Intervention Analysis Seasonal Adjustment for certain series. For the seasonal factors introduced in January 2014, BLS adjusted 31 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 the response in crude oil markets to the worldwide economic downturn in 2008. 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 Chris Graci at (202) 691-5826, or by e-mail at firstname.lastname@example.org, or contact Carlyle Jackson at (202) 691-6984, or by e-mail at email@example.com. If you have general questions about the CPI, please call our information staff at (202) 691-7000.