Lower Energy Prices Offset Higher Food Prices

Chart 1. Prices Over the Long Term
Table 1. Expenditure Categories and December 2014 Weights

The Everyday Price Index (EPI) decreased 1.0 percent in December in contrast to a 0.4 decrease in the Consumer Price Index (CPI). Both indexes decreased because lower energy prices offset higher food prices. However the EPI decreased more than the CPI because the index assigns a larger weight to energy.

Falling oil prices continued to provide relief to consumer budgets. Prices at the pump decreased 11 percent in December and have decreased 20.8 percent over the past year. On the home front, heating oil decreased 7.8 percent even as winter set in.

Balancing lower oil prices, the price of natural gas increased 2.4 percent in December. This is important because about 85 percent of Americans heat their homes with natural gas.

Prices at the grocery store increased 0.4 percent in December while the price of eating out increased 0.3 percent. Prices at the grocery store were led higher by staples such as eggs and dairy.

Eggs jumped 7.7 percent in December and have increased 10.7 percent over the past year. New regulations in California as well as increased domestic and foreign demand have pushed the price of eggs up sharply. Robust foreign demand also contributed to the price of dairy products increasing 0.6 percent over the past month and 5.3 percent over the last year.

In the past 12 months the EPI decreased 0.5 percent but the CPI increased 0.8 percent. The difference is due to increases in shelter and medical care. Shelter and medical care are not included in the EPI because they are purchased infrequently at contractually fixed prices.

As 2014 came to a close, inflation remained subdued by any measure. As we welcomed in 2015 there was a little extra cheer, alcohol prices were 0.5 percent lower December. 

About the EPI
AIER’s Everyday Price Index (EPI) measures the changing prices of frequently purchased items like food and utilities. We do this by selecting the prices of goods and services from the thousands collected monthly by the Bureau of Labor Statistics in computing its Consumer Price Index. The EPI basket contains only prices of goods and services that Americans typically buy at least once a month, excluding contractually fixed purchases such as mortgages. Our staff economists weight each EPI category in proportion to its share of Americans’ average monthly expenditures. In order to better reflect the out-of-pocket prices that consumers experience on a daily basis, the EPI does not seasonally adjust prices.

To learn more about our methodology, view the weights assigned to each component, and browse past EPI updates, visit AIER’s EPI Methodology page.

Chart 1. Prices Over the Long Term
Table 1. Expenditure Categories and December 2014 Weights