Friday, July 14, 2017

Airline fares continue to decline in June CPI

Airline fares continued to drop in June following declines in April and May, 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 June on a seasonally adjusted basis, , the same decline as in May. In April, the index fell 0.6 percent following 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 was unchanged in June on a seasonally adjusted basis. Over the last 12 months, the all items index rose 1.6 percent before seasonal adjustment.

The energy index declined again in June, falling 1.6 percent; this offset an increase in the index for all items less food and energy. All the major energy component indexes declined, with the gasoline index falling 2.8 percent. The food index was unchanged in June, with the index for food at home declining slightly as five of the six major grocery store food group indexes decreased.

The index for all items less food and energy rose 0.1 percent in June, its third straight such increase. The shelter index continued to rise, and the indexes for medical care, motor vehicle insurance, education, and personal care also increased. The indexes for airline fares, used cars and trucks, wireless telephone services, and new vehicles were among the indexes that declined in June.

The all items index rose 1.6 percent for the 12 months ending June; this measure has been declining steadily since February, when it was 2.7 percent. The index for all items less food and energy rose 1.7 percent for the 12 months ending June, the same increase as for the 12 months ending May. The energy index rose 2.3 percent over the last year, while the food index increased 0.9 percent, the BLS said in its July 14 statement.

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