Drop in Apparel’s Prices Offsets Jump in Motor Fuels’

The EPI increased 0.2 percent in November while the CPI was unchanged
EPI Expenditure Categories and November 2017 Weights

AIER’s Everyday Price Index rose 0.2 percent in November following a 0.7 percent drop in October. The EPI measures price changes people see in everyday purchases such as groceries, restaurant meals, gasoline, and utilities. As a comparison, the more widely known price gauge, the Consumer Price Index, which is reported by the Bureau of Labor Statistics and includes less frequently purchased items, was unchanged in November. The EPI is not seasonally adjusted, so we compare it with the unadjusted CPI.

The EPI including apparel, a broader measure, was off 0.1 percent in November as apparel prices plunged 3.2 percent for the month. The EPI and the EPI including apparel exclude prices of infrequently purchased, big-ticket items (such as cars, appliances, and furniture) and prices contractually fixed for prolonged periods (such as housing).

Over the past 12 months, the EPI has risen 2.6 percent while the EPI including apparel is up 2.3 percent. For the same period, the CPI is up 2.2 percent. Over the last five years, the EPI is up at an annualized rate of just 0.3 percent, the EPI including apparel is up at an annualized rate of 0.2 percent, and the CPI is up 1.4 percent.

In the latest month, the sharp 3.2 percent drop in apparel prices was offset by a 2.6 percent gain in motor fuel prices. This pattern is typical for these two EPI components. Apparel prices have been falling for more than two decades. The 20-year annualized rate of change for apparel prices is −0.4 percent; over the last 5 years, that pace is −0.7 percent; and over the past year, prices are down 1.6 percent. Motor fuel, which has a similar weight in the EPI index, is up at a 3.9 percent pace over the last two decades and up 16.5 percent over the past year, though the five-year annualized change is −5.6 percent as a result of the surge and subsequent collapse of crude-oil prices between 2000 and 2016.

Among the components of the EPI, 15 of the 24 categories were up in November while 9 were down. Over the last five years, just 8 of 25 categories have risen at a pace above 2 percent, while 8 have risen at a pace below 2 percent and 9 categories have seen falling prices.

For the components with the largest weights in the EPI, food at home (22.4 percent weight) is up 0.6 percent from a year ago and up at a 0.5 percent annualized rate over the past five years, food away from home (16.6 percent) is up 2.4 percent over the last 12 months and 2.5 percent over the last five years, household fuels and utilities (14.3 percent) are up 3.3 percent for the year and 1.6 percent over five years, and motor fuel (10.2 percent) is up 16.5 percent since last November but down 5.6 percent annually since five years ago. Combined, these top four categories account for 63.5 percent of the EPI.

The key take-aways are that broad-based increases are still not present in everyday prices: some areas have seen outright price declines over the past year and the past five years, some have seen modest price increases, and some have experienced persistent, sizable increases. Food and energy remain the dominant drivers of month-to-month changes in everyday prices.

The EPI increased 0.2 percent in November while the CPI was unchanged
EPI Expenditure Categories and November 2017 Weights

Robert Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.