Everyday Prices Unchanged in August as the CPI Increases 0.1 Percent
AIER’s Everyday Price Index was unchanged in August, compared to a 0.1 percent gain in the Consumer Price Index. The EPI is not seasonally adjusted, so we compare it with the unadjusted CPI. Over the past 12 months, the EPI has risen 3.3 percent while the CPI is up 2.7 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, was also unchanged in August and is up 2.9 percent over the past year. Both EPI 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 largest contributions to the performance of the index in August were fuels and utilities (+0.04 percentage points), restaurants (+0.03 percentage points), and groceries (+0.2 percentage points). These were offset by motor fuels (−0.04 percentage points), telephone services (−0.03 percentage points), and admissions to entertainment and sporting events (−0.03 percentage points). In total, 12 of the 24 categories within the EPI were up in August while 12 were down.
Over the past year, 21 of 24 categories show higher prices compared to a year ago. However, 12 of the 21 categories with increases have 12-month gains of 2 percent or less, leaving just 9 with gains above 2 percent. The category with the largest increase by far is motor fuel, for which prices are up 20.3 percent from a year ago. Other categories with significant increases over the past year include gardening services (8.9 percent), recreational reading materials (4.0 percent), and tobacco and smoking products (3.3 percent).
The components with the largest weights in the EPI are food at home (20.7 percent), food away from home (17.0 percent), household fuels and utilities (13.5 percent), and motor fuel (12.7 percent). Together, they account for 63.9 percent of the EPI. Among these important components, food at home is up just 0.5 percent from a year ago, food away from home is up 2.6 percent, household fuels and utilities are up 1.3 percent, and motor fuel is 20.3 percent higher. 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.
Price increases have accelerated over the past year as the 12-month change in the EPI has risen from 0.9 percent in June 2017 to the 3.3 percent pace last month. Over that same period, increases in the CPI have gone from 1.6 percent to 2.7 percent. In both cases, energy prices were a major contributor. The CPI excluding energy is up a more modest 2.1 percent for the 12 months through August 2018.
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.
