Airline fares decline in June CPI

Airline fares dipped nearly a full percentage point in June following a 1.9 percent drop in prices 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 0.9 percent dip continues a trend that, in addition to the May decline. saw a 2.7 percent drop in April. However, in early June, 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 0.1 percent in June on a seasonally adjusted basis after rising 0.2 percent in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.9 percent before seasonal adjustment.

The indexes for shelter, gasoline, and food all rose to lead to the seasonally adjusted increase in the all items index. The food index increased 0.2 percent in June, with the indexes for food at home and food away from home both rising 0.2 percent. Despite a 0.5-percent increase in the gasoline index, the energy index declined 0.3 percent, with the indexes for electricity and natural gas both falling.

The index for all items less food and energy rose 0.2 percent in June. The shelter index rose 0.1 percent, and the indexes for medical care, used cars and trucks, new vehicles, and recreation all increased. As with airline fares, the indexes for apparel, and household furnishings and operations all declined in June.

The all items index rose 2.9 percent for the 12 months ending June; this was the largest 12-month increase since the period ending February 2012. The index for all items less food and energy rose 2.3 percent for the 12 months ending June. The food index increased 1.4 percent, and the energy index rose 12.0 percent, its largest 12-month increase since the period ending February 2017, the BLS said in its July 12 statement.

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