CONSUMER PRICE INDEX – MAY 2021 The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in May on a seasonally adjusted basis after rising 0.8 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.0 percent before seasonal adjustment; this was the largest 12-month increase since a 5.4-percent increase for the period ending August 2008. The index for used cars and trucks continued to rise sharply, increasing 7.3 percent in May. This increase accounted for about one-third of the seasonally adjusted all items increase. The food index increased 0.4 percent in May, the same increase as in April. The energy index was unchanged in May, with a decline in the gasoline index again offsetting increases in the electricity and natural gas indexes. The index for all items less food and energy rose 0.7 percent in May after increasing 0.9 percent in April. Many of the same indexes continued to increase, including used cars and trucks, household furnishings and operations, new vehicles, airline fares, and apparel. The index for medical care fell slightly, one of the few major component indexes to decline in May. The all items index rose 5.0 percent for the 12 months ending May; it has been trending up every month since January, when the 12-month change was 1.4 percent. The index for all items less food and energy rose 3.8 percent over the last 12-months, the largest 12-month increase since the period ending June 1992. The energy index rose 28.5 percent over the last 12-months, and the food index increased 2.2 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. Nov. Dec. Jan. Feb. Mar. Apr. May ended 2020 2020 2021 2021 2021 2021 2021 May 2021 All items.................. .2 .2 .3 .4 .6 .8 .6 5.0 Food...................... .0 .3 .1 .2 .1 .4 .4 2.2 Food at home............. -.2 .3 -.1 .3 .1 .4 .4 .7 Food away from home (1).. .1 .4 .3 .1 .1 .3 .6 4.0 Energy.................... .7 2.6 3.5 3.9 5.0 -.1 .0 28.5 Energy commodities....... .5 5.1 7.3 6.6 8.9 -1.4 -.6 54.5 Gasoline (all types).... .5 5.2 7.4 6.4 9.1 -1.4 -.7 56.2 Fuel oil (1)............ 3.3 10.2 5.4 9.9 3.2 -3.2 2.1 50.8 Energy services.......... .9 .2 -.3 .9 .6 1.5 .7 6.2 Electricity............. .3 .4 -.2 .7 .0 1.2 .3 4.2 Utility (piped) gas service.............. 3.0 -.4 -.4 1.6 2.5 2.4 1.7 13.5 All items less food and energy................. .2 .0 .0 .1 .3 .9 .7 3.8 Commodities less food and energy commodities.... .0 .1 .1 -.2 .1 2.0 1.8 6.5 New vehicles............ .0 .4 -.5 .0 .0 .5 1.6 3.3 Used cars and trucks.... -1.4 -.9 -.9 -.9 .5 10.0 7.3 29.7 Apparel................. .7 .9 2.2 -.7 -.3 .3 1.2 5.6 Medical care commodities (1)...... -.4 -.2 -.1 -.7 .1 .6 .0 -1.9 Services less energy services.............. .2 .0 .0 .2 .4 .5 .4 2.9 Shelter................. .1 .1 .1 .2 .3 .4 .3 2.2 Transportation services 1.3 -.6 -.3 -.1 1.8 2.9 1.5 11.2 Medical care services... -.1 -.1 .5 .5 .1 .0 -.1 1.5 1 Not seasonally adjusted. Food The food index increased 0.4 percent in May. The index for food at home increased 0.4 percent, the same increase as in April. However, while the April index was broad-based, with all six major grocery store food group indexes rising, the May increase was mostly due to the index for meats, poultry, fish, and eggs, which increased 1.3 percent over the month. The beef index rose 2.3 percent in May, its largest increase since last June. The index for cereals and bakery products rose 0.5 percent in May, and the index for dairy and related products increased 0.4 percent. In contrast to these increases, the index for nonalcoholic beverages declined in May, falling 0.5 percent. The index for fruits and vegetables was unchanged in May after rising in each of the last 3 months. The index for fresh vegetables rose 0.5 percent in May, but the index for fresh fruits declined 0.3 percent. The index for other food at home was also unchanged in May after increasing in April. The food away from home index rose 0.6 percent in May following a 0.3-percent increase in April. The index for full service meals rose 0.6 percent, its largest increase since last June. The index for limited service meals increased 0.5 percent, the same increase as in both March and April. The food at home index increased 0.7 percent over the past 12 months. Five of the six major grocery store food group indexes increased, but the index for fruits and vegetables was the only one to rise more than 0.6 percent; it increased 2.9 percent. The only index to decline was nonalcoholic beverages, which fell 0.2 percent over the last 12 months. The index for food away from home rose 4.0 percent over the last year. The index for limited service meals rose 6.1 percent since May 2020. The index for full service meals rose 4.1 percent over the last 12 months; this was its largest 12-month increase since the period ending October 2008. The index for food at employee sites and schools declined sharply over the last year, falling 34.4 percent. Energy The energy index was unchanged in May after declining slightly in April. As in April, the gasoline index fell, while other energy component indexes increased. The gasoline index declined 0.7 percent in May after falling 1.4 percent in April. (Before seasonal adjustment, gasoline prices rose 4.2 percent in May.) The index for natural gas increased 1.7 percent in May, while the index for electricity advanced 0.3 percent following a 1.2-percent increase the prior month. The energy index rose 28.5 percent over the past 12 months. The gasoline index rose 56.2 percent since May 2020, when it was at its lowest level since February 2016. The May 2021 increase was the largest 12-month increase since the period ending April 1980. The index for electricity increased 4.2 percent over the last year, while the index for natural gas rose 13.5 percent. All items less food and energy The index for all items less food and energy rose 0.7 percent in May following a 0.9-percent increase in April. The index for used cars and trucks continued to rise sharply, increasing 7.3 percent in May after a 10.0-percent increase in April. The shelter index rose 0.3 percent in May. The index for rent rose 0.2 percent and the index for owners’ equivalent rent increased 0.3 percent. The index for lodging away from home, which rose 7.6 percent in April, increased 0.4 percent in May. The household furnishings and operations index increased 1.3 percent in May, its largest monthly increase since January 1976. The indexes for domestic services and for furniture and bedding were among the component indexes contributing to the increase. The index for new vehicles rose 1.6 percent in May, its largest 1-month increase since October 2009. The index for airline fares continued to increase, rising 7.0 percent in May after increasing 10.2 percent the prior month. The apparel index also rose in May, increasing 1.2 percent. The index for car and truck rentals continued to rise, increasing 12.1 percent after rising 16.2 percent the prior month. The index for recreation rose 0.2 percent in May following a 0.9-percent increase in April. The motor vehicle insurance index advanced 0.7 percent in May after increasing 2.5 percent the prior month. The indexes for education, for communication, and for alcoholic beverages also increased in May. The medical care index declined 0.1 percent in May after rising in each of the 4 previous months. Medical care component indexes were mixed. The index for prescription drugs declined 0.3 percent in May after rising 0.5 percent in April. The hospital services index increased 0.2 percent, while the physicians’ services index was unchanged. The index for all items less food and energy rose 3.8 percent over the past 12 months. The index for used cars and trucks increased 29.7 percent, while the index for motor vehicle insurance rose 16.9 percent. The index for new vehicles rose 3.3 percent over the past 12 months, its largest 12-month increase since the period ending November 2011. The index for car and truck rental more than doubled over the past 12 months, rising 109.8 percent. The shelter index increased 2.2 percent over the last 12 months. The medical care index rose 0.9 percent over the past 12 months, its smallest increase since the period ending March 1941. Not seasonally adjusted CPI measures The Consumer Price Index for All Urban Consumers (CPI-U) increased 5.0 percent over the last 12 months to an index level of 269.195 (1982-84=100). For the month, the index increased 0.8 percent prior to seasonal adjustment. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 5.6 percent over the last 12 months to an index level of 263.612 (1982-84=100). For the month, the index rose 0.9 percent prior to seasonal adjustment. The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 5.0 percent over the last 12 months. For the month, the index increased 0.8 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 2021 is scheduled to be released on Tuesday, July 13, 2021 at 8:30 a.m. (ET). -------------------------------------------------------------------------------------------------- Coronavirus (COVID-19) Pandemic Impact on May 2021 Consumer Price Index Data Data collection by personal visit for the Consumer Price Index (CPI) program has been suspended since March 16, 2020. When possible, data normally collected by personal visit were collected either online or by phone. Additionally, data collection in May was affected by the temporary closing or limited operations of certain types of establishments. These factors resulted in an increase in the number of prices considered temporarily unavailable and imputed. While the CPI program attempted to collect as much data as possible, many indexes are based on smaller amounts of collected prices than usual, and a small number of indexes that are normally published were not published this month. Additional information is available at www.bls.gov/covid19/effects-of-covid-19-pandemic-on-consumer-price-index.htm. ---------------------------------------------------------------------------------------------------- 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 visits or telephone calls 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 https://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: Item A Item B Item C Year I 112.500 225.000 110.000 Year II 121.500 243.000 128.000 Change in index points 9.000 18.000 18.000 Percent change 9.0/112.500 x 100 = 8.0 18.0/225.000 x 100 = 8.0 18.0/110.000 x 100 = 16.4 Use of Seasonally Adjusted and Unadjusted Data 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-2021.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 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 2021, 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 2021, revised seasonal factors and seasonally adjusted indexes for 2016 to 2020 were calculated and published. For series which are directly adjusted using the Census X-13ARIMA-SEATS seasonal adjustment software, the seasonal factors for 2020 will be applied to data for 2021 to produce the seasonally adjusted 2021 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. Thirty-four of the 81 components of the U.S. city average all items index are not seasonally adjusted for 2021.