Wednesday, March 15, 2017

Airline fares continue to rise in February CPI

Airline fares continued to rise in February, increasing 2.4 percent following a 2.0 percent rise in January and 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 more than offsets 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 0.1 percent in February on a seasonally adjusted basis. Over the last 12 months, the all items index rose 2.7 percent before seasonal adjustment.

The February increase was the smallest one-month rise in the seasonally adjusted all items index since July 2016. The gasoline index declined, partially offsetting increases in several indexes, including food, shelter, and recreation. The energy index fell 1.0 percent, with the decline in gasoline outweighing increases in the other energy component indexes. The food index increased 0.2 percent over the month, its largest rise since September 2015.

The index for all items less food and energy rose 0.2 percent in February. As with airline fares, the indexes for shelter, recreation, apparel, motor vehicle insurance, education, and medical care were among those that increased in February. Indexes that declined include communication, used cars and trucks, new vehicles, and household furnishings and operations.

The all items index rose 2.7 percent for the 12 months ending February; the 12-month increase has been trending upward since a July 2016 trough of 0.8 percent. The index for all items less food and energy rose 2.2 percent over the last 12 months; this was the fifteenth straight month the 12-month change remained in the range of 2.1 to 2.3 percent. The energy index rose 15.2 percent over the last year, while the food index was unchanged, the BLS said in its March 15 statement.

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