AIER’s Everyday Price Index rose 0.4 percent in August, ahead of the 0.3 percent gain in the Consumer Price Index. Despite the increase in the latest month, price increases overall remain modest in the U.S. economy. Over the past 12 months, the EPI has risen a moderate 1.7 percent. The EPI measures price changes people see in everyday purchases such as groceries, restaurant meals, gasoline, and utilities. The EPI including apparel, a broader measure, also gained 0.4 percent in August and is up 1.6 percent over the past year. Both measures exclude prices of infrequently purchased, big-ticket items (such as cars, appliances, and furniture) and prices contractually fixed for prolonged periods (such as housing).
The more widely known price gauge, the Consumer Price Index, reported by the Bureau of Labor Statistics, includes less frequently purchased items and everyday purchases. That measure is up 1.9 percent over the past 12 months. The EPI is not seasonally adjusted, so we compare it with the unadjusted CPI. Over the last five years, the EPI is unchanged, showing no price increase compared to an average rise of 1.3 percent for the CPI.
Among the components of the EPI, 11 of the 24 categories were up in August while 12 were down and 1 was unchanged. However, only one category, motor fuels, changed (up or down) more than 0.1 percent. Motor fuels jumped 0.4 percent on a not seasonally adjusted basis in a month that typically sees price declines.
Over the past year, about two-thirds of the categories show higher prices while one-third show price declines. A similar proportion show five-year annualized price gains and declines. The categories showing five-year declines include housekeeping supplies, nonprescription drugs, video and audio services, pets and pet products, telephone services, internet services, personal-care products, and motor fuels. Furthermore, food for home consumption is up just 0.6 percent at an annual rate over the past five years while apparel prices are up just 0.1 percent over the same period.
The components with the largest weights in the EPI are food at home (20.8 percent), food away from home (15.3 percent), household fuels and utilities (13.6 percent), motor fuel (8.7 percent), and nonprescription drugs (8.8 percent). Together, they account for 67.2 percent of the EPI. Among these important components, food at home is up just 0.3 percent from a year ago, food away from home is up 2.2 percent, household fuels and utilities are up 3.2 percent, motor fuel is 10.3 percent higher, and nonprescription drugs are 1.6 percent higher than a year ago. Most consumers watch prices, but certain ones, even among everyday purchases, tend to stand out. Food and gasoline prices tend to be volatile and get attention, particularly when prices rise quickly.
Many areas of the economy are seeing very modest price increases, and some are experiencing price declines. The key takeaway is that broad-based increases are still not present in everyday prices.