What to Watch For in Wednesday’s CPI Report

For the seasonal factors introduced in January , BLS adjusted 38 series using intervention analysis seasonal adjustment, including selected food and beverage items, motor fuels, and natural gas.

The energy index increased  

For more information on data revision scheduling, please see the Factsheet on Seasonal Adjustment at www. Corporate bonds have likewise sold off, and bond-like stocks like utilities have slid.

Summary: US inflation in surprise increase 

Inflation Accelerates in CPI Report. America's major stock indexes opened lower Wednesday morning on unexpectedly strong inflation data.

Inflation, as measured by the core CPI, has risen no higher than 2. If inflation stays around that number, the Fed will likely raise interest rates at a slower rate, keeping debt-financing cheap and fueling more economic growth. But a more aggressive rise in prices could spur faster action, inspiring the Fed to raise rates four times this year instead of its expected three raises, for instance. Fears of inflation have already rippled through the bond market, causing yields on year Treasury notes to rise to 2.

Corporate bonds have likewise sold off, and bond-like stocks like utilities have slid. The market is ahead of the data--and it could stay that way. The Bureau of Labor Statistics will adjust how it calculates smartphone prices to reflect technological advances, and change their measurement of used cars and trucks. These somewhat subjective shifts can have a significant impact on the index.

And the CPI is only one gauge of price changes. The producer price index, to be released on Thursday, measures the prices paid by wholesalers, which can be an early sign of a shift in expected retail prices. The Bureau of Economic Analysis releases its own index of prices called the personal consumption expenditure price index PCE , which the Fed watches closely.

The PCE is more flexible than the CPI, allowing statisticians to substitute one good for another — if peaches become expensive and people switch to plums, it can adjust for that consumer choice in how it weights the index.

The PCE also calculates health insurance premiums more directly than the CPI, an important difference given the escalating cost of those premiums.

Consumer inflation expectations also come out every month — and were rising at a relatively subdued 2. But anyone interested in tracking the real change in inflation should keep an eye out for several months, and see if any gains can be sustained. For the month, the index was unchanged prior to seasonal adjustment. For the month, the index was unchanged on a not seasonally adjusted basis. Please note that the indexes for the past 10 to 12 months are subject to revision.

The CPI reflects spending patterns for each of two population groups: The all urban consumer group represents about 93 percent of the total U.

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.

Prices are collected each month in 75 urban areas across the country from about 5, housing units and approximately 22, 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. 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. 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.

The index measures price change from a designed reference date. An increase of 7 percent from the reference base, for example, is shown as 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 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. 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.

For example, for a 1-month change of 0. For the latest data, including information on how to use the estimates of standard error, see https: 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: These factors are updated each February, and the new factors are used to revise the previous 5 years of seasonally adjusted data.

For more information on data revision scheduling, please see the Factsheet on Seasonal Adjustment at www. 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. 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 return to normal pricing after the worldwide economic downturn in 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.

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 in January , BLS adjusted 38 series using intervention analysis seasonal adjustment, including selected food and beverage items, motor fuels, and natural gas.

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. In January , revised seasonal factors and seasonally adjusted indexes for to were calculated and published. 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.


Wall Street opens lower 

CPI Home. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a .

Table 1. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by expenditure category ; Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by. Watch video · The Consumer Price Index, Consumer prices jump much more than forecast, sparking inflation fears. The report indicated that price pressures were "broad. 

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Consumer Price Index

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