Friday, August 11, 2017

Airline fares rise in July CPI

Airline fares rose 0.7 percent in July, ending a three-month run of price declines 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 July increase is not enough to offset the declines posted over the last three months. Fares dropped 2.7 percent in June and May on a seasonally adjusted basis and fell 0.6 percent in April.

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 rose 0.1 percent in July on a seasonally adjusted basis. Over the last 12 months, the all items index rose 1.7 percent before seasonal adjustment.

The indexes for shelter, medical care, and food all rose in July, leading to the seasonally adjusted increase in the all items index. The energy index declined slightly in July, with its major component indexes mixed. The index for natural gas declined, while the electricity index rose and the gasoline index was unchanged. The food index increased 0.2 percent, with the indexes for food at home and food away from home both rising.

The index for all items less food and energy rose 0.1 percent, the fourth month in a row it increased by that amount. The indexes for shelter, medical care, recreation, apparel, motor vehicle insurance, and airline fares all rose in July. These increases more than offset declines in the indexes for new vehicles, communication, used cars and trucks, and household furnishings and operations.

The all items index rose 1.7 percent for the 12 months ending July, a slightly larger increase than for the 12 months ending June. The index for all items less food and energy also rose 1.7 percent for the 12 month period, the same increase as for the 12 months ending May and June. The energy index rose 3.4 percent over the last year, while the food index increased 1.1 percent, the BLS said in its August 11 statement.

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