The Consumer Price Index for All Urban Consumers (CPI-U) in the Houston area declined 0.5 percent in July and August, the U.S. Bureau of Labor Statistics reported today. Assistant Commissioner for Regional Operations Stanley W. Suchman noted that the biggest factor in the decline was a 0.4-percent decrease in the index for all items less food and energy, though lower energy prices, down 3.1 percent, contributed nearly as much to the decline. In contrast, food prices rose 0.8 percent during the period. (Data in this report are not seasonally adjusted. Accordingly, short-term changes may reflect the impact of seasonal influences.)

During the year ended in August 2018, the all items CPI-U advanced 2.3 percent. The index for all items less food and energy rose at a slower 1.4-percent pace. The August annual increases slowed from the June annual rates for both indexes. (See chart 1 and table 1.)

Food

Local food prices rose 0.8 percent in July and August, after falling 0.7 percent in May and June. Between the two components of the index, prices for food at home (grocery stores) rose 1.3 percent, while prices for food away from home were up 0.5 percent.

From August 2017 to August 2018, the food index advanced 0.8 percent, matching the bimonthly increase. The annual change reflected the combined effects of a 1.8-percent price rise for food away from home and a 0.4-percent price decline for food at home.

Energy

The energy index fell 3.1 percent in July and August, after climbing 5.4 percent in May and June. The current two-month decline was primarily the result of a 3.9-percent decrease in the motor fuel index, but another important contributor was a 2.5-percent decline in electricity costs. In contrast, natural gas prices rose 0.6 percent during the period.

Despite the two-month decline, the energy index advanced 15.5 percent during the year ended in August 2018. Two of the three energy sub-components contributed to the annual increase as motor fuel prices advanced 22.1 percent and electricity prices rose 9.8 percent over the year. During the same period, natural gas costs fell 1.2 percent, the first annual decline for this sub-component since July 2016.

All items less food and energy

The index for all items less food and energy decreased 0.4 percent in July and August, after advancing 0.8 percent in May and June. A number of factors contributed to the decline. During the period, apparel prices fell 3.0 percent, motor vehicle insurance costs were down 3.9 percent, and the index for education and communication decreased 1.7 percent. Price declines were also noted for airline fares and lodging away from home (hotels and motels). The sharp decrease in hotel and motel rates, pushed total shelter costs down 0.1 percent, even as renters’ costs rose 0.5 percent and costs for owners’ equivalent rent increased 0.4 percent. The index for recreation also rose, up 2.8 percent, its largest bimonthly increase since March and April 1999; higher costs for recreational services were the main contributor.

From August 2017 to August 2018, the index for all items less food and energy rose 1.4 percent. The biggest factor in the annual increase was a 1.4-percent rise in shelter costs. Within shelter, the indexes for both owners’ equivalent rent (2.2 percent) and renters’ costs (2.6 percent) rose at a faster pace. Other large contributors to the annual increase included higher prices for household furnishings and operations (4.9 percent) and medical care (2.7 percent). Helping to offset some of these increases, apparel prices fell over the year, down 0.8 percent.

The October 2018 Consumer Price Index for All Items for Houston-The Woodlands-Sugar Land is scheduled to be released Wednesday, November 14, 2018.

Technical Note

The Consumer Price Index (CPI) is a measure of the average change in prices over time in a fixed market basket of goods and services. The Bureau of Labor Statistics publishes CPIs for two population groups: (1) a CPI for All Urban Consumers (CPI-U) which covers approximately 93 percent of the total population and (2) a CPI for Urban Wage Earners and Clerical Workers (CPI-W) which covers 29 percent of the total population. The CPI-U includes, in addition to wage earners and clerical workers, groups such as professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, and retirees and others not in the labor force.

The CPI is based on prices of food, clothing, shelter, and fuels, transportation fares, charges for doctors' and dentists' services, drugs, and the other goods and services that people buy for day-to-day living. Each month, prices are collected in 75 urban areas across the country from about 5,000 housing units and approximately 22,000 retail establishments--department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments. All taxes directly associated with the purchase and use of items are included in the index.

The index measures price changes from a designated reference date (1982-84) that equals 100.0. An increase of 16.5 percent, for example, is shown as 116.5. This change can also be expressed in dollars as follows: the price of a base period "market basket" of goods and services in the CPI has risen from $10 in 1982-84 to $11.65. For further details, see the CPI home page on the Internet at www.bls.gov/cpi and the BLS Handbook of Methods, Chapter 17, The Consumer Price Index, available on the Internet at www.bls.gov/opub/hom/pdf/homch17.pdf.

In calculating the index, price changes for the various items in each location are averaged together with weights that represent their importance in the spending of the appropriate population group. Local data are then combined to obtain a U.S. city average. Because the sample size of a local area is smaller, the local area index is subject to substantially more sampling and other measurement error than the national index. In addition, local indexes are not adjusted for seasonal influences. As a result, local area indexes show greater volatility than the national index, although their long-term trends are quite similar. NOTE: Area indexes do not measure differences in the level of prices between cities; they only measure the average change in prices for each area since the base period.

The Houston-The Woodlands-Sugar Land, Texas, Core Based Statistical Area includes Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, and Waller Counties.

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