Wednesday, February 15, 2017

Airline fares continue to rise in January CPI

Airline fares increased 2.0 percent in January following a 1.9 percent increase in December 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 CPIThe increase offsets a significant portion of the 4.7 percent decrease posted by the index for all of 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 0.6 percent in January on a seasonally adjusted basis, the BLS reported in its February 15 news release containing the monthly statistics. Over the last 12 months, the all items index rose 2.5 percent before seasonal adjustment.

The January increase was the largest seasonally adjusted all items increase since February 2013. A sharp rise in the gasoline index accounted for nearly half the increase, and advances in the indexes for shelter, apparel, and new vehicles also were major contributors.

The energy index increased 4.0 percent in January as the gasoline index advanced 7.8 percent and the index for natural gas also increased. The food index, which had been unchanged for 6 consecutive months, increased 0.1 percent. The food at home index was unchanged, while the index for food away from home rose 0.4 percent.

The index for all items less food and energy rose 0.3 percent in January. Most of the major component indexes increased in January, with the indexes for apparel, new vehicles, motor vehicle insurance, and airline fares all rising 0.8 percent or more. The shelter index rose 0.2 percent, a smaller increase than in recent months.

The all items index rose 2.5 percent for the 12 months ending January, the largest 12-month increase since March 2012. The index for all items less food and energy rose 2.3 percent over the last 12 months, and the energy index increased 10.8 percent, its largest 12-month increase since November 2011. In contrast, the food index declined 0.2 percent over the last 12 months., the BLS said in its statement.

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