Airline fares fall sharply in December CPI

Airline fares reversed two months of increases and fell sharply in December, making 2014 the second consecutive year in which airline fares dropped, according to the latest figures on the Consumer Price Index for All Urban Consumers (CPI-U) issued by the Bureau of Labor Statistics, U.S. Department of Labor.

December's airline fare index fell 5.0 percent, more than offsetting increases of 1.4 percent in November and 2.4 percent in October. The drop, combined with declines in other indexes, resulted in a seasonally adjusted CPI-U that was down 0.4 percent from the November figure.

The December dip in the airline fare index halted two months of increases and resumed a trend that began last summer. While prices rose 2.4 percent in October and 1.4 percent in November, they had fallen 5.9 percent in July, 4.7 percent in August, and 0.5 percent in September.

For 2014 overall, airline fares declined 4.7 percent, following a 1.7 percent drop the previous year, the BLS said in its Jan. 15 statement on the CPI-U. 

The calculations of airline fares include an allowance for checked bag fees but the Bureau of Labor Statistics (BLS) does not include other ancillary charges.

The agency found a certain percentage of passengers checked bags. It applies that percentage to all  incoming quotes during sample rotation and then assigns the appropriate checked bag fee (assuming 1 bag, for either one-way or round-trip, based on the description of the quote). It also applies baggage specs to airlines that do not charge for bags so that if they start to charge in the future, BLS could easily incorporate that price increase.

December’s decrease in the airline fare index combined with a sharp decline of 9.4 percent in the gasoline index and helped offset a 0.3 percent increase in the food index, its largest monthly increase since September.

On a seasonally adjusted basis, the index for all items less food and energy was unchanged in December following increases of 0.1 percent in November, 0.2 percent in October and 0.1 percent in September. This was only the second time since 2010 that the index did not increase, BLS said.

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 BLS said. 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.

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