economy news online news
By Beiyi Seow
Consumer inflation in the United States cooled for an 11th straight month on an annual basis in May, the Labor Department said Tuesday, in an encouraging sign for policymakers. online news
Federal Reserve officials are set to begin a two-day policy meeting on Tuesday and the latest figures could allow room for a pause in interest rate hikes at the end of their gathering.
While the US central bank has lifted the benchmark lending rate 10 times in a row since early last year to rein in inflation, it is widely anticipated to hold off this week on signs of cooling in the world’s biggest economy.
Government figures released Tuesday show that the consumer price index (CPI), a key gauge of inflation, jumped 4.0 percent from a year ago in May, in line with analyst expectations and down from 4.9 percent in April.
This brings it to the lowest level in around two years, and less than half the peak rate of 9.1 percent in mid-2022.
“Today’s report is good news for hard working families,” President Joe Biden said in a statement. “It shows continued progress tackling inflation at the same time that unemployment remains at historic lows.”
Cooling prices
Analysts however caution that Fed policymakers are looking for a more certain trend of cooling growth before they end their cycle of rate hikes.
On a monthly basis, CPI rose 0.1 percent in May, decelerating from 0.4 percent in April, the Labor Department said.
Excluding the volatile food and energy components, consumer inflation was up 5.3 percent over the last 12 months.
“The index for shelter was the largest contributor to the monthly all items increase, followed by an increase in the index for used cars and trucks,” the Labor Department said.
But while there was a “leap” in used vehicle prices last month, this was probably the last of a response to an earlier surge in auction prices, said Ian Shepherdson of Pantheon Macroeconomics.
“CPI used vehicle prices will fall over the summer, likely starting as soon as June,” he said in a note. He added that rent growth is set to slow as well.
Meanwhile, new vehicle prices dipped on a monthly basis, on improving supply and “softer demand in the face of tightening credit conditions,” he said.
Room to pause
“While inflation rates remain elevated, the moderate slowing provides the Fed room to pause its rate hikes,” said Nationwide chief economist Kathy Bostjancic in a note.
For now, halting further rate increases allows the Fed more time to assess the economic impact of its earlier actions, which came on top of recent pressures in the banking sector.
But when it comes to the future policy path, “incoming information on inflation, the labor market as well as considerations about credit conditions” will determine if the Fed is done raising rates, said Rubeela Farooqi of High Frequency Economics.
Oren Klachkin, lead US economist at Oxford Economics, cautioned that “a month’s worth of data won’t ease policymakers’ worries.”
He told AFP there remains a risk of further Fed rate hikes in the second half of the year.
bys/mlm
© Agence France-Presse. All rights are reserved.
economy news online news
Consumer Price Index Summary May 2023
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in May on a seasonally
adjusted basis, after increasing 0.4 percent in April, the U.S. Bureau of Labor Statistics
reported today. Over the last 12 months, the all items index increased 4.0 percent before
seasonal adjustment.
The index for shelter was the largest contributor to the monthly all items increase, followed by
an increase in the index for used cars and trucks. The food index increased 0.2 percent in May
after being unchanged in the previous 2 months. The index for food at home rose 0.1 percent over
the month while the index for food away from home rose 0.5 percent. The energy index, in
contrast, declined 3.6 percent in May as the major energy component indexes fell.
The index for all items less food and energy rose 0.4 percent in May, as it did in April and
March. Indexes which increased in May include shelter, used cars and trucks, motor vehicle
insurance, apparel, and personal care. The index for household furnishings and operations and
the index for airline fares were among those that decreased over the month.
The all items index increased 4.0 percent for the 12 months ending May; this was the smallest
12-month increase since the period ending March 2021. The all items less food and energy index
rose 5.3 percent over the last 12 months. The energy index decreased 11.7 percent for the 12
months ending May, and the food index increased 6.7 percent over the last year.
Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city average
Food
The food index rose 0.2 percent in May. The food at home index increased 0.1 percent over the
month, following a 0.2-percent decrease in April. Three of the six major grocery store food group
indexes increased over the month. The index for fruits and vegetables increased 1.3 percent in
May, following a 0.5-percent decrease in April. The other food at home index rose 0.4 percent
over the month, and the nonalcoholic beverages index increased 0.7 percent.
The index for meats, poultry, fish, and eggs decreased 1.2 percent in May, as the index for eggs
fell 13.8 percent, the largest decrease in that index since January 1951. The dairy and related
products index declined 1.1 percent over the month, and the cereals and bakery products index was
unchanged in May.
The food away from home index rose 0.5 percent in May. The index for full service meals increased
0.4 percent over the month and the index for limited service meals increased 0.5 percent.
The food at home index rose 5.8 percent over the last 12 months. The index for cereals and bakery
products rose 10.7 percent over the 12 months ending in May. The remaining major grocery store
food groups posted increases ranging from 0.3 percent (meats, poultry, fish, and eggs) to 9.2
percent (other food at home).
The index for food away from home rose 8.3 percent over the last year. The index for full service
meals rose 6.8 percent over the last 12 months, and the index for limited service meals rose 8.0
percent over the same period.
Energy
The energy index fell 3.6 percent in May after rising 0.6 percent in April. The gasoline index
decreased 5.6 percent in May, following a 3.0-percent increase in the previous month. (Before
seasonal adjustment, gasoline prices fell 1.4 percent in May.)
Other energy components also declined. The natural gas index decreased 2.6 percent over the month
, the fourth consecutive decrease in that index. The index for electricity decreased 1.0 percent
in May, after falling 0.7 percent in both April and March. The fuel oil index also declined in
May, down 7.7 percent.
The energy index fell 11.7 percent over the past 12 months. The gasoline index decreased 19.7
percent over the last 12 months, while the natural gas index fell 11.0 percent, and the fuel oil
index fell 37.0 percent over the span. In contrast, the index for electricity rose 5.9 percent
over the last year.
All items less food and energy
The index for all items less food and energy rose 0.4 percent in May, as it did in April and
March. The shelter index increased 0.6 percent over the month after rising 0.4 percent in April.
The index for rent rose 0.5 percent in May, as did the index for owners’ equivalent rent. The
index for lodging away from home increased 1.8 percent in May after decreasing 3.0 percent in
April.
The shelter index was the largest factor in the monthly increase in the index for all items less
food and energy. Among the other indexes that rose in May was the index for used cars and trucks,
which increased 4.4 percent, and the index for motor vehicle insurance which increased 2.0
percent. The indexes for apparel, personal care, and education also increased in May.
Several indexes declined in May, led by the household furnishings and operations index which fell
0.6 percent over the month. This was the first decline in that index since June 2021 and also the
largest 1-month decline since August 2009. The index for airline fares decreased 3.0 percent over
the month, following a 2.6-percent decline in April. The index for communication fell 0.3 percent
over the month. The index for new vehicles and the index for recreation each declined 0.1 percent
in May.
The medical care index increased 0.1 percent in May, after being unchanged the previous month. The
index for hospital services rose 1.0 percent over the month, after a 0.5-percent increase in
April. The prescription drugs index increased 0.1 percent in May, while the physicians’ services
index declined 0.5 percent.
The index for all items less food and energy rose 5.3 percent over the past 12 months. The
shelter index increased 8.0 percent over the last year, accounting for over 60 percent of the
total increase in all items less food and energy. Other indexes with notable increases over the
last year include motor vehicle insurance (+17.1 percent), recreation (+4.5 percent), household
furnishings and operations (+4.2 percent), and new vehicles (+4.7 percent).
Not seasonally adjusted CPI measures
The Consumer Price Index for All Urban Consumers (CPI-U) increased 4.0 percent over the last 12
months to an index level of 304.127 (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 3.6
percent over the last 12 months to an index level of 298.382 (1982-84=100). For the month, the
index increased 0.2 percent prior to seasonal adjustment.
The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 4.3 percent over the
last 12 months. For the month, the index increased 0.2 percent on a not seasonally adjusted basis.
Please note that the indexes for the past 10 to 12 months are subject to revision.
The Consumer Price Index for June 2023 is scheduled to be released on Wednesday, July 12, 2023,
at 8:30 a.m. (ET).
Technical Note
Brief Explanation of the CPI
The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods
and services. The CPI reflects spending patterns for each of two population groups: all
urban consumers and urban wage earners and clerical workers. The all urban consumer group
represents about 93 percent of the total U.S. population. It is based on the expenditures
of almost all residents of urban or metropolitan areas, including professionals, the self
-employed, the poor, the unemployed, and retired people, as well as urban wage earners
and clerical workers. Not included in the CPI are the spending patterns of people living
in rural nonmetropolitan areas, farming families, people in the Armed Forces, and those
in institutions, such as prisons and mental hospitals. Consumer inflation for all urban
consumers is measured by two indexes, namely, the Consumer Price Index for All Urban
Consumers (CPI-U) and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is based on
the expenditures of households included in the CPI-U definition that meet two requirements:
more than one-half of the household’s income must come from clerical or wage occupations,
and at least one of the household’s earners must have been employed for at least 37 weeks
during the previous 12 months. The CPI-W population represents about 29 percent of the
total U.S. population and is a subset of the CPI-U population.
The CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors’
and dentists’ services, drugs, and other goods and services that people buy for day-to-day
living. Prices are collected each month in 75 urban areas across the country from about
6,000 housing units and approximately 22,000 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 75 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 visit, telephone call, or web collection by the
Bureau’s trained representatives.
In calculating the index, price changes for the various items in each location are
aggregated using 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 23
selected 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. The CPI-U and CPI-W are
considered final when released, but the C-CPI-U is issued in preliminary form and subject
to three subsequent quarterly revisions.
The index measures price change from a designed reference date. For most of 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 7 percent from the reference base, for example,
is shown as 107.000. Alternatively, that relationship can also be expressed as the price
of a base period market basket of goods and services rising from $100 to $107.
Sampling Error in the CPI
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 CPI. 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 percent of these
estimates will 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-U, 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 www.bls.gov/cpi/tables/variance-estimates/home.htm.
Calculating Index Changes
Movements of the indexes from 1 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 following
table shows an example of using index values to calculate percent changes:
The Consumer Price Index (CPI) produces both unadjusted and seasonally adjusted data.
Seasonally adjusted data are computed using seasonal factors derived by the X-13ARIMA-SEATS
seasonal adjustment method. These factors are updated each February, and the new factors are
used to revise the previous 5 years of seasonally adjusted data. The factors are available
at www.bls.gov/cpi/tables/seasonal-adjustment/seasonal-factors-2022.xlsx. For more
information on data revision scheduling, please see the Factsheet on Seasonal Adjustment at
www.bls.gov/cpi/seasonal-adjustment/questions-and-answers.htm and the Timeline of Seasonal
Adjustment Methodological Changes at
www.bls.gov/cpi/seasonal-adjustment/timeline-seasonal-adjustment-methodology-changes.htm.
For analyzing short-term 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 weather events,
production cycles, model changeovers, holidays, and sales. This allows data users to focus on
changes that are not typical for the time of year. The unadjusted data are of primary interest
to consumers concerned about the prices they actually pay. Unadjusted data are also 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. BLS advises against the use of seasonally adjusted data in escalation
agreements because seasonally adjusted series are revised annually.
Intervention Analysis
The Bureau of Labor Statistics uses intervention analysis seasonal adjustment (IASA) for some
CPI series. Sometimes extreme values or sharp movements can distort the underlying seasonal
pattern of price change. Intervention analysis seasonal adjustment is a process by which the
distortions caused by such unusual events are estimated and removed from the data prior to
calculation of seasonal factors. The resulting seasonal factors, which more accurately represent
the seasonal pattern, are then applied to the unadjusted data.
For example, this procedure was used for the motor fuel series to offset the effects of the 2009
return to normal pricing after the worldwide economic downturn in 2008. Retaining this outlier
data during seasonal factor calculation would distort the computation of the seasonal portion
of the time series data for motor fuel, so it was estimated and removed from the data prior to
seasonal adjustment. Following that, seasonal factors were calculated based on this “prior
adjusted” data. These seasonal factors represent a clearer picture of the seasonal pattern in
the data. The last step is for motor fuel seasonal factors to be applied to the unadjusted data.
For the seasonal factors introduced for January 2022, BLS adjusted 72 series using intervention
analysis seasonal adjustment, including selected food and beverage items, motor fuels, electricity,
and vehicles.
Revision of Seasonally Adjusted Indexes
Seasonally adjusted data, including the U.S. city average all items index levels, are subject to
revision for up to 5 years after their original release. Every year, economists in the CPI
calculate new seasonal factors for seasonally adjusted series and apply them to the last 5 years
of data. Seasonally adjusted indexes beyond the last 5 years of data are considered to be final
and not subject to revision. For January 2022, revised seasonal factors and seasonally adjusted
indexes for 2017 to 2021 were calculated and published. For series which are directly adjusted
using the Census X-13ARIMA-SEATS seasonal adjustment software, the seasonal factors for 2021 will
be applied to data for 2022 to produce the seasonally adjusted 2022 indexes. Series which are
indirectly seasonally adjusted by summing seasonally adjusted component series have seasonal
factors which are derived and are therefore not available in advance.
Determining Seasonal Status
Each year the seasonal status of every series is reevaluated based upon certain statistical
criteria. Using these criteria, BLS economists determine whether a series should change its
status from “not seasonally adjusted” to “seasonally adjusted”, or vice versa. If any of the 81
components of the U.S. city average all items index 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. For 2022, 22 of the 81 components of the U.S. city
average all items index are seasonally adjusted.
Contact Information
For additional information about the CPI visit www.bls.gov/cpi or contact the CPI Information and
Analysis Section at 202-691-7000 or cpi_info@bls.gov.
For additional information on seasonal adjustment in the CPI visit
www.bls.gov/cpi/seasonal-adjustment/home.htm or contact the CPI seasonal adjustment section at
202-691-6968 or cpiseas@bls.gov.
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