US Consumer Price Index - December 2009

On a seasonally adjusted basis, the December Consumer Price Index for
All Urban Consumers (CPI-U) rose 0.1 percent, the U.S. Bureau of
Labor Statistics reported today. Over the last 12 months, the index
increased 2.7 percent before seasonal adjustment.

The seasonally adjusted increase in the all items index was broad
based, with the indexes for food, energy, and all items less food and
energy all posting modest increases. Within the latter group, a sharp
rise in the index for used cars and trucks was the largest
contributor to the 0.1 percent increase, while the indexes for
airline fares, apparel, and lodging away from home rose as well. In
contrast, the indexes for rent and owners' equivalent rent were
unchanged and the index for new vehicles declined.

Grocery store food indexes showed broad-based increases, leading to
the food index rising 0.2 percent, its largest one-month advance in
over a year. The energy index also rose 0.2 percent; this was its
smallest increase in five months. The indexes for fuel oil and
gasoline rose, but the electricity index was unchanged and the
natural gas index declined.


Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city
average


Seasonally adjusted changes from
preceding month
Un-
adjusted
12-mos.
June July Aug. Sep. Oct. Nov. Dec. ended
2009 2009 2009 2009 2009 2009 2009 Dec.
2009

All items.................. .7 .0 .4 .2 .3 .4 .1 2.7
Food...................... .0 -.3 .1 -.1 .1 .1 .2 -.5
Food at home............. .0 -.5 .0 -.3 .0 .0 .3 -2.4
Food away from home (1).. .1 .1 .1 .1 .1 .2 .1 1.9
Energy.................... 7.4 -.4 4.6 .6 1.5 4.1 .2 18.2
Energy commodities....... 16.2 -.4 8.5 1.1 1.9 6.3 .5 46.5
Gasoline (all types).... 17.3 -.8 9.1 1.0 1.6 6.4 .2 53.5
Fuel oil................ 4.8 -1.5 6.2 1.5 6.3 9.0 1.1 6.5
Energy services.......... -1.2 -.3 .0 .1 .9 1.4 -.1 -5.4
Electricity............. -1.9 -.6 -.1 .6 .6 1.4 .0 -.5
Utility (piped) gas
service.............. 1.3 .9 .4 -1.7 1.9 1.5 -.7 -18.1
All items less food and
energy................. .2 .1 .1 .2 .2 .0 .1 1.8
Commodities less food and
energy commodities.... .3 .2 -.3 .3 .4 .2 .2 3.0
New vehicles............ .7 .5 -1.3 .4 1.6 .6 -.3 4.9
Used cars and trucks.... .9 .0 1.9 1.6 3.4 2.0 2.5 9.2
Apparel................. .7 .6 -.1 .1 -.4 -.3 .4 1.9
Medical care commodities .1 -.1 .5 .6 .2 .0 -.1 3.3
Services less energy
services.............. .1 .0 .2 .1 .1 .0 .1 1.4
Shelter................. .1 -.2 .1 .0 .0 -.2 .0 .3
Transportation services -.1 .5 .6 .7 .4 .6 .3 3.9
Medical care services... .2 .3 .2 .4 .2 .4 .2 3.4

1 Not seasonally adjusted.



Year in Review

For the 12 month period ending December 2009, the CPI-U rose 2.7
percent, compared to 0.1 percent for 2008. The larger increase was
primarily due to the energy index, which rose 18.2 percent during
2009 after falling 21.3 percent in 2008. The energy upturn was caused
by the gasoline index, which rose 53.5 percent in 2009 after
declining 43.1 percent in 2008. The household energy index, in
contrast, declined 4.9 percent during 2009 with the index for natural
gas falling 18.1 percent and the electricity index declining 0.5
percent. The food index, which rose 5.9 percent in 2008, fell 0.5
percent for the 12 months ending December 2009, the first December-to-
December decline since 1961. The index for food away from home rose
1.9 percent while the food at home index fell 2.4 percent. Within
food at home, all six major grocery food groups posted declines in
2009 after rising in 2008. The dairy and related products group
declined the most, falling 7.6 percent, its largest annual decline
since 1938.

The index for all items less food and energy rose 1.8 percent during
2009, the same increase as in 2008. This identical increase was the
result of offsetting factors. Pushing the index higher were vehicle
prices, which rose in 2009 after declining in 2008. The indexes for
new vehicles rose 4.9 percent in 2009 and the index for used cars and
trucks increased 9.2 percent. Additionally, the apparel index turned
up in 2009, rising 1.9 percent after declining in each of the
previous two years. The medical care index rose more rapidly in 2009,
increasing 3.4 percent after a 2.6 percent increase the previous
year, and the tobacco index increased 30.1 percent in 2009 after
rising 6.3 percent in 2008. Largely offsetting these accelerations
was the shelter index, which posted its smallest annual increase
since its inception in 1953. It increased only 0.3 percent after
increasing 1.9 percent in 2008, with the indexes for both rent and
owners' equivalent rent increasing 0.7 percent. Also, the indexes for
recreation and for household furnishings and operations both declined
in 2009 after rising in 2008.


Consumer Price Index Data for December 2009

Food

The food index rose 0.2 percent in December after rising 0.1 percent
in each of the previous two months. The food at home index increased
0.3 percent, its largest increase since October 2008. Among the major
grocery store food groups, the index for meats, poultry, fish, and
eggs was unchanged while the other five groups all posted increases.
The index for cereals and bakery products rose 0.6 percent, while the
dairy and related products index increased 0.5 percent after
declining 0.7 percent in November. The indexes for fruits and
vegetables and for other food at home both rose 0.3 percent while the
index for nonalcoholic beverages increased 0.2 percent. The index for
food away from home increased in December, rising 0.1 percent after
increasing 0.2 percent in November.

Energy

The energy index, which increased 4.1 percent in November, rose 0.2
percent in December. The index for energy commodities increased 0.5
percent, with the gasoline index rising 0.2 percent after increasing
6.4 percent in November. (Before seasonal adjustment, gasoline prices
declined 1.5 percent in December.) The index for household energy was
unchanged in December. The fuel oil index rose 1.1 percent after a
9.0 percent increase in the previous month, but the index for natural
gas fell 0.7 percent. The index for electricity, which increased 1.4
percent in November, was unchanged in December.



All items less food and energy

The index for all items less food and energy rose 0.1 percent in
December after being unchanged in November. The index for used cars
and trucks rose 2.5 percent in December, accounting for almost half
of the increase in the all items less food and energy index. The
index for airline fares also continued to rise, increasing 2.4
percent in December after advancing 3.8 percent in November. Also
increasing were the apparel index, which rose 0.4 percent, and the
medical care index, which rose 0.1 percent. The shelter index, which
declined 0.2 percent in November, was unchanged in December. The
indexes for rent and owners' equivalent rent were both unchanged
after declining in November, while the index for lodging away from
home rose 0.5 percent in December. The index for new vehicles
declined in December, falling 0.3 percent after increasing in each of
the previous three months. The recreation index also declined in
December, falling 0.4 percent as televisions, sporting goods and toys
were among many recreation components that posted declines.


Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased
2.7 percent over the last 12 months to an index level of 215.949
(1982-84=100). For the month, the index decreased 0.2 percent prior
to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) increased 3.4 percent over the last 12 months to an index
level of 211.703 (1982-84=100). For the month, the index decreased
0.1 percent prior to seasonal adjustment.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U)
increased 2.8 percent over the last 12 months. For the month, the
index declined 0.2 percent on a not seasonally adjusted basis. Please
note that the indexes for the post-2007 period are subject to
revision.


The Consumer Price Index for January 2010 is scheduled to be released
on Friday, February 19, 2010, at 8:30 a.m. (EST).


Item Structure and publication changes for January 2010

Effective with the release of CPI data for January 2010 scheduled for
Friday, February 19, the BLS will introduce several item structure
and other publication changes into the CPI.

Shelter. The expenditure weight for second homes will be moved from
Lodging away from home to a new, unpriced stratum under the Owners'
equivalent rent expenditure class. As such, the expenditure class
index for Owners' equivalent rent will now include both primary and
secondary homes, and the title of that expenditure class index will
change from Owners' equivalent rent of primary residences to Owners'
equivalent rent of residences. Both the expenditure class (Owners'
equivalent rent of residences), and the Owners' equivalent rent of
primary residence stratum within it, will be published.

Current Structure
Lodging away from home
Housing at school, excluding board
Other lodging away from home including hotels and motels

Owners' equivalent rent of primary residence
Owners' equivalent rent of primary residence*

New Structure
Lodging away from home
Housing at school, excluding board
Other lodging away from home, including hotels and motels

Owners' equivalent rent of residences
Owners' equivalent rent of primary residence
Unsampled owners' equivalent rent of secondary residences*


Medical care commodities. The item structure for Medical care
commodities will change:

Current Structure
Medical care commodities
Prescription drugs
Prescription drugs
Unsampled rent or repair of medical equipment*
Nonprescription drugs and medical supplies
Internal and respiratory OTC drugs
Nonprescription medical equipment and supplies

New Structure
Medical Care Commodities
Medicinal drugs
Prescription drugs
Nonprescription drugs
Medical equipment and supplies
Medical equipment and supplies
Unsampled rent or repair of medical equipment*

Telephone services. The item structure for telephone services will
also change:

Current structure
Telephone services
Land-line telephone services, local charges
Land-line telephone services, long distance
Wireless telephone services

New structure
Telephone services
Wireless telephone services
Land-line telephone services

Indexes that are deemed continuous will have the same reference base
previously used. New index series will have a December 2009 = 100
reference base. Unpublished series are indicated with a *.

Other publication changes
The index for State and local registration and license will be
retitled State motor vehicle registration and license fees.

A new index for Intracity mass transit will be published. Indexes
for Land-line interstate toll calls and Land-line intrastate toll
calls will be discontinued.


Expenditure Weight Update

Effective with the release of the January 2010 CPI on February 19,
2010, the Bureau of Labor Statistics (BLS) will update the
consumption expenditure weights in the Consumer Price Index for All
Urban Consumers (CPI-U) and Consumer Price Index for Urban Wage
Earners and Clerical Workers (CPI-W) to the 2007-08 period. The
updated expenditure weights for these indexes will replace the 2005-
2006 weights that were introduced effective with the January 2008 CPI
release. As originally announced by BLS in December 1998, CPI
expenditure weights will continue to be updated at two-year
intervals.


Facilities for Sensory Impaired

Information from this release will be made available to sensory
impaired individuals upon request. Voice phone: 202-691-5200,
Federal Relay Services: 1-800-877-8339.


Brief Explanation of the CPI

The Consumer Price Index (CPI) is a measure of the average change in
prices over time of goods and services purchased by households. The
Bureau of Labor Statistics publishes CPIs for two population groups:
(1) the CPI for Urban Wage Earners and Clerical Workers (CPI-W),
which covers households of wage earners and clerical workers that
comprise approximately 32 percent of the total population and (2) the
CPI for All Urban Consumers (CPI-U) and the Chained CPI for All Urban
Consumers (C-CPI-U), which cover approximately 87 percent of the
total population and include in addition to wage earners and clerical
worker households, groups such as professional, managerial, and
technical workers, the self-employed, short-term workers, the
unemployed, and retirees and others not in the labor force.

The CPIs are based on prices of food, clothing, shelter, and fuels,
transportation fares, charges for doctors' and dentists' services,
drugs, and other goods and services that people buy for day-to-day
living. Prices are collected each month in 87 urban areas across the
country from about 4,000 housing units and approximately 25,000
retail establishments-department stores, supermarkets, hospitals,
filling stations, and other types of stores and service
establishments. All taxes directly associated with the purchase and
use of items are included in the index. Prices of fuels and a few
other items are obtained every month in all 87 locations. Prices of
most other commodities and services are collected every month in the
three largest geographic areas and every other month in other areas.
Prices of most goods and services are obtained by personal visits or
telephone calls of the Bureau's trained representatives.

In calculating the index, price changes for the various items in each
location are averaged together with weights, which represent their
importance in the spending of the appropriate population group.
Local data are then combined to obtain a U.S. city average. For the
CPI-U and CPI-W separate indexes are also published by size of city,
by region of the country, for cross-classifications of regions and
population-size classes, and for 27 local areas. Area indexes do not
measure differences in the level of prices among cities; they only
measure the average change in prices for each area since the base
period. For the C-CPI-U data are issued only at the national level.
It is important to note that the CPI-U and CPI-W are considered final
when released, but the C-CPI-U is issued in preliminary form and
subject to two annual revisions.

The index measures price change from a designed reference date. For
the CPI-U and the CPI-W the reference base is 1982-84 equals 100.0.
The reference base for the C-CPI-U is December 1999 equals 100. An
increase of 16.5 percent from the reference base, for example, is
shown as 116.5. This change can also be expressed in dollars as
follows: the price of a base period market basket of goods and
services in the CPI has risen from $10 in 1982-84 to $11.65.

For further details visit the CPI home page on the Internet at
http://www.bls.gov/cpi/ or contact our CPI Information and Analysis
Section on (202) 691-7000.


Note on Sampling Error in the Consumer Price Index

The CPI is a statistical estimate that is subject to sampling error
because it is based upon a sample of retail prices and not the
complete universe of all prices. BLS calculates and publishes
estimates of the 1-month, 2-month, 6-month and 12-month percent
change standard errors annually, for the CPI-U. These standard error
estimates can be used to construct confidence intervals for
hypothesis testing. For example, the estimated standard error of the
1 month percent change is 0.04 percent for the U.S. All Items
Consumer Price Index. This means that if we repeatedly sample from
the universe of all retail prices using the same methodology, and
estimate a percentage change for each sample, then 95% of these
estimates would be within 0.08 percent of the 1 month percentage
change based on all retail prices. For example, for a 1-month change
of 0.2 percent in the All Items CPI for All Urban Consumers, we are
95 percent confident that the actual percent change based on all
retail prices would fall between 0.12 and 0.28 percent. For the
latest data, including information on how to use the estimates of
standard error, see "Variance Estimates for Price Changes in the
Consumer Price Index, January-December 2008". These data are
available on the CPI home page (http://www.bls.gov/cpi), or by using
the following link http://www.bls.gov/cpi/cpivar2008.pdf


Calculating Index Changes

Movements of the indexes from one month to another are usually
expressed as percent changes rather than changes in index points,
because index point changes are affected by the level of the index in
relation to its base period while percent changes are not. The
example below illustrates the computation of index point and percent
changes.

Percent changes for 3-month and 6-month periods are expressed as
annual rates and are computed according to the standard formula for
compound growth rates. These data indicate what the percent change
would be if the current rate were maintained for a 12-month period.

Index Point Change

CPI
202.416
Less previous index
201.800
Equals index point change
.616

Percent Change

Index point difference
.616
Divided by the previous index
201.800
Equals
0.003
Results multiplied by one hundred
0.003x100
Equals percent change
0.3



Regions Defined

The states in the four regions shown in Tables 3 and 6 are listed
below.

The Northeast--Connecticut, Maine, Massachusetts, New Hampshire, New
York, New Jersey, Pennsylvania, Rhode Island, and Vermont.
The Midwest--Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota,
Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.
The South--Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky,
Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South
Carolina, Tennessee, Texas, Virginia, West Virginia, and the District
of Columbia.
The West--Alaska, Arizona, California, Colorado, Hawaii, Idaho,
Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.


A Note on Seasonally Adjusted and Unadjusted Data

Because price data are used for different purposes by different
groups, the Bureau of Labor Statistics publishes seasonally adjusted
as well as unadjusted changes each month.

For analyzing general price trends in the economy, seasonally
adjusted changes are usually preferred since they eliminate the
effect of changes that normally occur at the same time and in about
the same magnitude every year--such as price movements resulting from
changing climatic conditions, production cycles, model changeovers,
holidays, and sales.

The unadjusted data are of primary interest to consumers concerned
about the prices they actually pay. Unadjusted data also are used
extensively for escalation purposes. Many collective bargaining
contract agreements and pension plans, for example, tie compensation
changes to the Consumer Price Index before adjustment for seasonal
variation.

Seasonal factors used in computing the seasonally adjusted indexes
are derived by the X-12-ARIMA Seasonal Adjustment Method. Seasonally
adjusted indexes and seasonal factors are computed annually. Each
year, the last 5 years of seasonally adjusted data are revised. Data
from January 2004 through December 2008 were replaced in January
2009. Exceptions to the usual revision schedule were: the updated
seasonal data at the end of 1977 replaced data from 1967 through
1977; and, in January 2002, dependently seasonally adjusted series
were revised for January 1987-December 2001 as a result of a change
in the aggregation weights for dependently adjusted series. For
further information, please see "Aggregation of Dependently Adjusted
Seasonally Adjusted Series," in the October 2001 issue of the CPI
Detailed Report.

The seasonal movement of all items and 54 other aggregations is
derived by combining the seasonal movement of 73 selected components.
Each year the seasonal status of every series is reevaluated based
upon certain statistical criteria. If any of the 73 components
change their seasonal adjustment status from seasonally adjusted to
not seasonally adjusted, not seasonally adjusted data will be used in
the aggregation of the dependent series for the last 5 years, but the
seasonally adjusted indexes will be used before that period. Note:
47 of the 73 components are seasonally adjusted for 2009.

Seasonally adjusted data, including the all items index levels, are
subject to revision for up to five years after their original
release. For this reason, BLS advises against the use of these data
in escalation agreements.

Effective with the calculation of the seasonal factors for 1990, the
Bureau of Labor Statistics has used an enhanced seasonal adjustment
procedure called Intervention Analysis Seasonal Adjustment for some
CPI series. Intervention Analysis Seasonal Adjustment allows for
better estimates of seasonally adjusted data. Extreme values and/or
sharp movements which might distort the seasonal pattern are
estimated and removed from the data prior to calculation of seasonal
factors. Beginning with the calculation of seasonal factors for
1996, X-12-ARIMA software was used for Intervention Analysis Seasonal
Adjustment.

For the seasonal factors introduced in January 2009, BLS adjusted 29
series using Intervention Analysis Seasonal Adjustment, including
selected food and beverage items, motor fuels, electricity and
vehicles. For example, this procedure was used for the Motor fuel
series to offset the effects of events such as damage to oil
refineries from Hurricane Katrina.

For a complete list of Intervention Analysis Seasonal Adjustment
series and explanations, please refer to the article "Intervention
Analysis Seasonal Adjustment", located on our website at
http://www.bls.gov/cpi/cpisapage.htm.

For additional information on seasonal adjustment in the CPI, please
write to the Bureau of Labor Statistics, Division of Consumer Prices
and Price Indexes, Washington, DC 20212 or contact Jeff Wilson at
(202) 691-6968, or by e-mail at Wilson.Jeff@bls.gov. If you have
general questions about the CPI, please call our information staff at
(202) 691-7000.


Recalculated Seasonally Adjusted Indexes to be Available on February
17, 2010

Each year with the release of the January CPI, seasonal adjustment
factors are recalculated to reflect price movements from the just-
completed calendar year. This routine annual recalculation may result
in revisions to seasonally adjusted indexes for the previous 5 years.
BLS will make available recalculated seasonally adjusted indexes, as
well as recalculated seasonal adjustment factors, for the period
January 2005 through December 2009, on Wednesday, February 17, 2010.
This date is two working days before the scheduled release of the
January 2010 CPI on Friday, February 19, 2010.