Airline fares dip in July CPI

Airline fares decreased significantly in July, more than offsetting the rise seen in June, 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 CPIDespite it being the peak of the summer travel season, July airline fares dropped 4.9 percent after rising 1.5 percent in June. That dip was in marked contrast to the overall CPI-U, which was unchanged on a seasonally adjusted basis from the June figures, according to the BLS's Aug. 16 news release that contained the statistics.

The calculations of airline fares include an allowance for checked bag fees but the BLS does not include other ancillary charges which continue to rise and represent a 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.

Like the overall CPI-U, the July food index was unchanged after falling 0.2 percent and 0.1 percent in May and June, respectively. However, the other indexes were mixed.

The index for energy declined 1.6 percent in July after rising in each of the last four months and posting an increase of 6.1 percent over the last three months. July's dip was due to a sharp decrease in the gasoline index, BLS reported.

The food at home index declined 0.2 percent as four of the six major grocery store food group indexes decreased, while the index for food away from home rose 0.2 percent.

The index for all items less food and energy increased 0.1 percent in July after rising 0.2 percent in June. The shelter index rose 0.2 percent, its smallest increase since March, and the indexes for medical care, new vehicles, and motor vehicle insurance also rose. In contrast, the indexes for airline fares, used cars and trucks, communication, and recreation were among those that declined in July.

From July 2015 through July 2016, the airline fare index posted a net decline of 4.6 percent while the all items index has shown a net increase of 0.8 percent on an unadjusted basis, a smaller increase than the 1.0 percent rise for the 12 months ending in June.

The overall CPI-U posted a 0.8 percent increase for the 12 months ending July, a smaller increase than the 1.0 percent rise for the 12 months ending June. Similarly, the index for all items less food and energy rose 2.2 percent for the 12 months ending July, a smaller increase than the 2.3 percent rise for the 12 months ending June, the BLS said in its statement.

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