Everyday Price Index Decreased in June, Helped by Falling Fuel Costs
Wednesday, 18 July 2012
According to the AIER Everyday Price Index, the prices of goods and services that Americans purchase frequently fell 1 percent in June (before seasonal adjustments). The Consumer Price Index, in contrast, decreased 0.1 percent in June (before seasonal adjustment).
The difference comes from the basket of goods the two indexes measure.
The EPI, a proprietary index of the American Institute for Economic Research, captures the expenses people have to budget for every month. It looks at only the items most consumers purchase on a regular basis, such as food, utilities and motor fuel.
The CPI, which is produced by the U.S. Bureau of Labor Statistics, considers a larger array of goods and services in order to calculate the average annual change in the cost of living. This index includes housing, clothing, and big ticket items such as appliances, furniture, and cars.
(For all of 2012, the AIER EPI has increased 1.6 percent, compared to only 1.2 percent increase in the official CPI.)
The June decrease in the EPI was driven primarily by the decrease in the cost of motor fuel, which fell by 6 percent. The price drop is a welcome relief from overall rising prices and provides some breathing room in the everyday budgets of people. But fuel prices are notoriously volatile and can change their trend at any time.
Prices of other everyday goods and services, which tend not to fluctuate as much, continue their steady increase. This includes a 2.5 percent increase in the cost of household utilities (mostly electricity).
The longer term trend of rising everyday prices has not been broken. Prices of goods and services consumers buy on everyday basis have increased some 50 percent over the last decade. Falling fuel costs provide temporary respite. As soon as fuel costs stop their decline we will be back in the world of rising prices.