Airline fares continue to slide in May CPI

Airline fares dropped 1.9 in 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.

The dip follows a 2.7 percent drop in April, though just last week several airlines signaled that higher prices were on the horizon due to increasing fuel prices for jet fuel, which have gone up 50 percent in the past year.

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 increased 0.2 percent in May on a seasonally adjusted basis after rising 0.2 percent in April. Over the last 12 months, the all items index rose 2.8 percent before seasonal adjustment, the fastest rate since early 2012.

The indexes for gasoline and shelter were the largest factors in the seasonally adjusted increase in the all items index, as they were in April. The gasoline index increased 1.7 percent, more than offsetting declines in some of the other energy component indexes and led to a 0.9-percent rise in the energy index. The medical care index rose 0.2 percent. The food index was unchanged over the month.

The index for all items less food and energy rose 0.2 percent in May. The shelter index rose 0.3 percent in May. The indexes for new vehicles, education and communication, and tobacco increased in May, while the indexes for household furnishing and operations, and used cars and trucks fell. The indexes for apparel, recreation, and personal care were unchanged.

The all items index rose 2.8 percent for the 12 months ending May, continuing its upward trend since the beginning of the year. The index for all items less food and energy rose 2.2 percent for the 12 months ending May. The food index increased 1.2 percent, and the energy index rose 11.7 percent, the BLS said in its June 12 statement.

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