Economic News Release

Consumer Price Index Summary

 Transmission of material in this release is embargoed until                                        
 8:30 a.m. (EST) Friday, January 16, 2015       USDL-15-0018

 Technical information: (202) 691-7000	Reed.Steve@bls.gov	www.bls.gov/cpi
 Media Contact:         (202) 691-5902	PressOffice@bls.gov 

 CONSUMER PRICE INDEX - DECEMBER 2014

 The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.4 percent 
 in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics 
 reported today. Over the last 12 months, the all items index increased 0.8 
 percent before seasonal adjustment.

 The gasoline index continued to fall sharply, declining 9.4 percent and leading 
 to the decrease in the seasonally adjusted all items index. The fuel oil index 
 also fell sharply, and the energy index posted its largest one-month decline 
 since December 2008, although the indexes for natural gas and for electricity 
 both increased. The food index, in contrast, rose 0.3 percent, its largest 
 increase since September.  

 The index for all items less food and energy was unchanged in December, 
 following a 0.2 percent increase in October and a 0.1 percent rise in November. 
 This was only the second time since 2010 that it did not increase. The shelter 
 index continued to rise, and the index for medical care posted its largest 
 increase since August 2013. However, these increases were offset by declines 
 in a broad array of indexes including apparel, airline fares, used cars and 
 trucks, household furnishings and operations, and new vehicles. 

 The all items index increased 0.8 percent over the last 12 months. This is 
 notably lower than the 1.3 percent change for the 12 months ending November. 
 The energy index has declined 10.6 percent over the span. In contrast, the 
 3.4 percent increase in the food index is its largest 12-month increase since 
 February 2012. The index for all items less food and energy has increased 1.6 
 percent over the last 12 months, its smallest 12-month change since the 12 
 months ending February 2014. 

 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.
                              June  July  Aug.  Sep.  Oct.  Nov.  Dec.   ended 
                              2014  2014  2014  2014  2014  2014  2014   Dec.  
                                                                         2014  
                                                                               
                                                                               
 All items..................    .3    .1   -.2    .1    .0   -.3   -.4       .8
  Food......................    .1    .4    .2    .3    .1    .2    .3      3.4
   Food at home.............    .0    .4    .2    .3    .1    .1    .3      3.7
   Food away from home (1)..    .2    .3    .2    .3    .2    .4    .3      3.0
  Energy....................   1.6   -.3  -2.6   -.7  -1.9  -3.8  -4.7    -10.6
   Energy commodities.......   3.0   -.3  -3.9  -1.1  -3.0  -6.4  -9.1    -20.5
    Gasoline (all types)....   3.3   -.3  -4.1  -1.0  -3.0  -6.6  -9.4    -21.0
    Fuel oil (1)............  -1.7   -.7  -1.2  -2.1  -4.0  -3.5  -7.8    -19.1
   Energy services..........   -.4   -.4   -.6   -.2   -.2   -.3   1.0      3.7
    Electricity.............    .2   -.3    .1   -.7    .5    .1    .8      3.1
    Utility (piped) gas                                                        
       service..............  -2.6   -.4  -2.8   1.6  -2.7  -1.7   1.5      5.8
  All items less food and                                                      
     energy.................    .1    .1    .0    .1    .2    .1    .0      1.6
   Commodities less food and                                                   
      energy commodities....    .1    .0   -.1    .0    .0   -.4   -.3      -.8
    New vehicles............   -.3    .3    .2    .0    .2   -.1   -.1       .5
    Used cars and trucks....   -.4   -.3   -.3   -.1   -.9  -1.2  -1.2     -4.2
    Apparel.................    .5    .2   -.2    .0   -.2  -1.1  -1.2     -2.0
    Medical care commodities    .7    .3   -.1    .5    .0    .6   1.0      4.8
   Services less energy                                                        
      services..............    .1    .1    .0    .2    .3    .2    .1      2.4
    Shelter.................    .2    .3    .2    .3    .2    .3    .2      2.9
    Transportation services     .1   -.7   -.6    .1    .8    .3   -.5      1.7
    Medical care services...    .0    .1    .0    .1    .2    .4    .3      2.4

   1 Not seasonally adjusted.

 Consumer Price Index Data for December 2014

 Food

 The food index rose 0.3 percent in December after a 0.2 percent increase in 
 November. The index for food at home rose 0.3 percent with five of the six 
 major grocery store food groups increasing. The index for dairy and related 
 products posted the largest increase, rising 0.6 percent after declining in 
 November. The fruits and vegetables index rose 0.4 percent, with the fresh 
 vegetables index rising 2.4 percent but the index for fresh fruits declining 
 1.3 percent. The index for meats, poultry, fish, and eggs increased 0.3 percent 
 as the index for beef and veal continued to rise, advancing 0.7 percent. The 
 index for other food at home increased 0.3 percent, and the cereals and bakery 
 products index advanced 0.2 percent. The nonalcoholic beverages index, in 
 contrast, declined in December, falling 0.4 percent after rising in each of 
 the previous three months. The food at home index has risen 3.7 percent over 
 the last 12 months, with all six groups rising over the span. The index for 
 food away from home rose 0.3 percent in December after a 0.4 percent increase 
 in November, and has risen 3.0 percent over the last year.  


 Energy

 The energy index continued to decline, falling 4.7 percent in December after 
 a 3.8 percent decrease in November. This was its sixth decline in a row, and 
 the index has fallen 13.3 percent over the six month span. The gasoline index 
 fell 9.4 percent in December and has declined 22.4 percent since June. (Before 
 seasonal adjustment, gasoline prices fell 11.1 percent in December.) The fuel 
 oil index also continued to decline, falling 7.8 percent, its largest decline 
 since June 2012. However, the index for natural gas turned up in December, 
 rising 1.5 percent after falling in October and November. The electricity 
 index also increased in December, rising 0.8 percent.  


 All items less food and energy

 The index for all items less food and energy was unchanged in December. The 
 shelter index increased, advancing 0.2 percent, with the indexes for rent, 
 owners' equivalent rent, and lodging away from home all rising 0.2 percent. 
 The medical care index rose 0.5 percent in December. The index for 
 prescription drugs rose 0.9 percent, and the hospital services index increased 
 0.5 percent. The tobacco index advanced in December, increasing 0.8 percent, 
 and the personal care index rose 0.1 percent. A wide array of declines offset 
 these increases. The apparel index fell 1.2 percent in December following a 
 1.1 percent decline the prior month. The index for airline fares, which rose 
 in October and November, fell sharply in December, declining 5.0 percent. The 
 index for used cars and trucks fell 1.2 percent, the same decline as last month. 
 The index for household furnishings and operations fell 0.3 percent, as did 
 the alcoholic beverages index. The index for new vehicles declined 0.1 percent, 
 the same decrease as in November. 


 Not seasonally adjusted CPI measures

 The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent 
 over the last 12 months to an index level of 234.812 (1982-84=100). For the 
 month, the index fell 0.6 percent prior to seasonal adjustment.   

 The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) 
 increased 0.3 percent over the last 12 months to an index level of 229.909 
 (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 0.3 
 percent over the last 12 months. For the month, the index fell 0.8 percent on a 
 not seasonally adjusted basis. Please note that the indexes for the post-2012 
 period are subject to revision.  


 Year in Review

 The CPI rose 0.8 percent in 2014 after a 1.5 percent increase in 2013. This is 
 the second-smallest December-December increase in the last 50 years, trailing 
 only the 0.1 percent increase in 2008. It is considerably lower than the 2.1 
 percent average annual increase over the last ten years.  

 The energy index, which rose slightly in both 2012 and 2013, declined sharply 
 in 2014, falling 10.6 percent, the largest decline since 2008. The gasoline 
 index was the main cause of the decline, falling 21.0 percent, with most of 
 the decrease over the last few months of the year. This followed a 1.0 percent 
 decline in 2013. The fuel oil index declined as well, falling 19.1 percent in 
 2014 after a 1.8 percent decline in 2013. In contrast, the energy services 
 index accelerated in 2014, rising 3.7 percent after a 2.4 percent advance in 
 2013. The electricity index rose 3.1 percent in 2014, similar to its 3.2 
 percent advance in 2013. The index for natural gas, which fell slightly in 
 2013, rose 5.8 percent in 2014, ending a streak of five years of declines.  
 Despite the decline in 2014, the energy index has risen at a 3.2 percent 
 annual rate over the past 10 years.   

 The index for food rose 3.4 percent in 2014, a substantial acceleration from 
 its 2013 increase of 1.1 percent. The index for food at home rose 3.7 percent 
 in 2014 after rising only 0.4 percent in 2013. All six major grocery store food 
 group indexes increased in 2014. The index for meats, poultry, fish, and eggs, 
 which rose 2.9 percent in 2013, increased 9.2 percent, its largest 
 December-December increase since 2003. The index for beef and veal rose 18.7 
 percent in 2014. The index for dairy and related products rose 5.3 percent in 
 2014, while the index for fruits and vegetables advanced 3.2 percent; both had 
 declined in 2013. Also turning up after declining in 2013 was the index for other 
 food at home (up 1.5 percent) and the index for nonalcoholic beverages (up 
 0.7 percent). The only major grocery store food group index not to accelerate was 
 cereals and bakery products, which repeated its 2013 increase of 0.5 percent. 
 The index for food away from home rose 3.0 percent in 2014 after increasing 2.1 
 percent in 2013. Over the last ten years, the food index has risen at an average 
 annual rate of 2.7 percent.  

 The index for all items less food and energy rose 1.6 percent in 2014, a slight 
 deceleration from its 1.7 percent increase in 2013, and below its 1.9 percent 
 annual rate over the past ten years. The shelter index accelerated in 2014, 
 increasing 2.9 percent after advancing 2.5 percent in 2013. This was its largest 
 increase since 2007. The rent index rose 3.4 percent and the index for owners' 
 equivalent rent increased 2.6 percent. The medical care index also accelerated, 
 rising 3.0 percent after a 2.0 percent increase in 2013. The new vehicles index 
 accelerated slightly, rising 0.5 percent in 2014 after a 0.4 percent advance the 
 previous year. The personal care index decelerated slightly, rising 1.3 percent 
 in 2014 following a 1.4 percent increase in 2013. The recreation index was 
 unchanged in 2014 after rising slightly in 2013.The index for used cars and 
 trucks turned down in 2014, falling 4.2 percent after rising 2.0 percent in 2013. 
 Similarly, the apparel index, which rose 0.6 percent in 2013, fell 2.0 percent in 
 2014. The index for household furnishings and operations continued to decline in 
 2014, falling 0.9 percent after a 1.4 percent decrease the previous year. The 
 index for airline fares also continued to fall, declining 4.7 percent after a 1.4 
 percent decrease the prior year.     

	
 The Consumer Price Index for January 2015 is scheduled to be released on Thursday, 
 February 26, 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 graci.christopher@bls.gov,
 or contact Carlyle Jackson at (202) 691-6984, or by e-mail at jackson.carlyle@bls.gov.
 If you have general questions about the CPI, please call our information staff at
 (202) 691-7000.  


 Recalculated Seasonally Adjusted Indexes to be Available on February 20, 2015

 Each year with the release of the January CPI, seasonal adjustment factors are
 recalculated to reflect price movements from the just-completed calendar year. This
 routine annual recalculation may result in revisions to seasonally adjusted indexes for
 the previous 5 years. BLS will make available recalculated seasonally adjusted indexes,
 as well as recalculated seasonal adjustment factors, for the period January 2010
 through December 2014, on Friday, February 20, 2015. This date is before the scheduled
 release of the January 2015 CPI on Thursday, February 26, 2015.

 The revised indexes and seasonal factors will be available on the internet. The address
 is http://www.bls.gov/cpi/cpisapage.htm. Look under Seasonal Adjustment in the CPI and
 select Revised Seasonally Adjusted Indexes and Factors, 2010-2014.

 For further information please contact Christopher Graci by electronic mail at
 Graci.Christopher@bls.gov or by telephone at (202) 691-5826 or Carlyle Jackson by
 electronic mail at Jackson.Carlyle@bls.gov or by telephone at (202) 691-6984.

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Last Modified Date: January 16, 2015
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