AIER’s Everyday Price Index fell 0.1 percent in January from December. Compared with 12 months ago, it fell 0.3 percent. The EPI measures the change in prices that people see in their everyday purchases, such as groceries, gasoline, utilities, and housekeeping supplies.
A more inclusive measure of everyday prices, EPI including apparel, posted identical declines -- 0.1 percent in January and 0.3 percent in the past 12 months. Both measures exclude prices of infrequently purchased, big-ticket items (such as cars, appliances, and furniture) and exclude prices that are contractually fixed for prolonged periods (most notably, housing).
The more widely known Consumer Price Index, or CPI, reported by the Bureau of Labor Statistics, increased 0.2 percent in January (prior to seasonal adjustment). Seasonally adjusted CPI posted no change in January. For the past 12 months, the CPI rose 1.4 percent. Since the EPI aims to reflect the prices that people actually pay, it is not seasonally adjusted, making the CPI prior to seasonal adjustment the proper point of comparison.
Both in the latest month and over the past year the EPI fell somewhat, while the CPI rose slightly. The decline in the EPI is driven primarily by a substantial drop in energy-related prices. Motor fuel prices fell 4.5 percent in January and 7.7 percent in the past 12 months. Household fuels and utilities, a component of the EPI that is also affected by energy-related costs, rose 0.5 percent in January but fell 3.3 percent over the past 12 months. Because the EPI covers only about 35 percent of total consumer expenditures, the decline in energy-related costs has a much larger effect on the EPI than on the CPI.
In addition to energy costs, several other price trends in the past year differ in their long-term tendencies. Over the past 12 months, a host of prices grew far more slowly than they did in the past 15 years, including food-at-home, personal-care products, pet products, domestic services, and postage and delivery services. On the other hand, the cost of telephone services; admission to movies, concerts, and sporting events; and prices for digital media grew noticeably faster than the long-term average of the past.
Over the past 15 years the EPI tended to grow faster than the CPI -- on average it grew about 2.7 percent per year, while the CPI grew about 2.2 percent. The pattern has changed recently, with the EPI falling while the CPI is rising. However, we cannot say at this point that the change will endure. The EPI is much more volatile than the CPI. In other past periods, for example in 2009 and 2002, for a few months the EPI rose more slowly that the CPI. But these periods did not change the overall picture –everyday prices (captured by the EPI) tend to rise faster than the overall price level (captured by the CPI) over the longer term.