Wednesday, June 14, 2017

Airline fares dip in May CPI

Airline fares continued to decline in May following an April decline that halted a four-month run of fare increases, 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 CPIFares dropped 2.7 percent in May on a seasonally adjusted basis following a drop of 0.6 percent from the month before. The April dip followed increases for the four-month period of Dec. 2016 through March 2017.

With the airlines' continued focus on increasing ancillary revenue, there is an important caveat. While the BLS's calculations of airline fares include an allowance for checked bag fees, the BLS does not include other ancillary charges which represent an ever-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 0.1 percent in May on a seasonally adjusted basis. Over the last 12 months, the all items index rose 1.9 percent before seasonal adjustment.

A decrease in the energy index was the main contributor to the monthly decrease in the all items index. The energy index fell 2.7 percent, led by a decline of 6.4 percent in the gasoline index. The food index rose 0.2 percent, due to increases in four of the six major grocery store food group indexes.

The index for all items less food and energy rose 0.1 percent in May, as it did in April. The shelter index increased 0.2 percent over the month. However, many indexes declined in May, including those for apparel, communication, and medical care services, in addition to airline fares.

The all items index rose 1.9 percent for the 12 months ending May, a smaller increase than the 2.2- percent rise for the 12 months ending April. This month’s increase is still a larger rise than the 1.6- percent average annual increase over the past 10 years. The index for all items less food and energy rose 1.7 percent over the previous 12 months; this compares to a 1.8-percent average annual increase over the past decade. The energy index rose 5.4 percent over the last year, while the food index increased 0.9 percent, the BLS said in its June 14 statement.

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