Friday, April 14, 2017

Airline fares continue to rise in March CPI

Airline fares continued to rise in March, increasing 0.4 percent following a 2.4 percent rise in February, 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 combined increases more than offset 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 decreased 0.3 percent in March on a seasonally adjusted basis. Over the last 12 months, the all items index rose 2.4 percent before seasonal adjustment.

The March decline was the first one-month decrease in the seasonally adjusted all items index since February 2016. A decline in the gasoline index was the largest factor, with a decrease in the index for wireless telephone services also contributing.

The energy index declined 3.2 percent, with the gasoline index falling 6.2 percent, and other major energy component indexes decreasing as well. The food index rose 0.3 percent, with the index for food at home increasing 0.5 percent, its largest increase since May 2014.

The index for all items less food and energy fell 0.1 percent in March, its first decline since January 2010. The shelter index rose 0.1 percent, and the indexes for motor vehicle insurance, medical care, tobacco, airline fares, and alcoholic beverages also increased in March. These increases were more than offset by declines in several indexes, including those for wireless telephone services, used cars and trucks, new vehicles, and apparel.

The all items index rose 2.4 percent for the 12 months ending March, a smaller increase than the 2.7- percent rise for the period ending February. The index for all items less food and energy rose 2.0 percent over the last 12 months, the smallest 12-month increase since November 2015. The energy index rose 10.9 percent over the last year, while the food index increased 0.5 percent, the BLS said in its April 14 statement.

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