Wednesday, January 18, 2017

Airline fares increase in Dec. CPI; full-year figure down

Airline fares increased 1.9 percent in December after a 1.3 percent drop in November and a 2.2 percent drop in October, according to the latest Consumer Price Index for All Urban Consumers (CPI-U) issued by the Bureau of Labor Statistics (BLS), U.S. Department of Labor.

Bureau of Labor Statistics logo, consumer price index CPIDespite December's increase, airline fares declined overall for the year just ended, dropping 4.7 percent during 2016. Last year's decline marks the fourth consecutive year that airline fares have fallen.

There is an important caveat, however, The BLS's calculations of airline fares include an allowance for checked bag fees but the BLS does not include other ancillary charges which continue to rise and represent a larger percentage of airlines' overall revenue.

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 one 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, the BLS could easily incorporate that price increase.

Overall, the CPI-U increased 0.3 percent in December on a seasonally adjusted basis, the BLS reported. Over the last 12 months, the all items index rose 2.1 percent before seasonal adjustment.

Continuing their recent trends, the shelter and gasoline indexes increased in December and were largely responsible for the seasonally adjusted all items increase. The shelter index rose 0.3 percent in December, while the gasoline index increased 3.0 percent.

Recent trends also continued in the food indexes, as the food at home index again declined, offsetting an increase in the index for food away from home and leaving the overall food index unchanged for the sixth consecutive month. The energy index continued to rise, advancing 1.5 percent in December, primarily due to an increase in the gasoline index.

The index for all items less food and energy rose 0.2 percent in December, the same increase as in November. Along with the shelter index, the indexes for motor vehicle insurance, medical care, education, airline fares, used cars and trucks, and new vehicles were among the indexes that increased. The indexes for apparel and communication declined in December.

The all items index rose 2.1 percent for the 12 months ending December. This figure has been steadily rising since July, and is the largest 12-month increase since the period ending June 2014. The index for all items less food and energy rose 2.2 percent for the 12 months ending December, and the energy index increased 5.4 percent. In contrast, the food index declined 0.2 percent over the last 12 months, the BLS said in its statement.

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