AIER Everyday Price Index Falls 0.1% As A Drop In Gasoline Overshadows A Rise In Food

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by: American Institute of Economic Research

By Robert Hughes

AIER's Everyday Price Index fell 0.1 percent in July while the Consumer Price Index was unchanged for the month. The EPI measures price changes people see in everyday purchases such as groceries, restaurant meals, gasoline, and utilities. The EPI is not seasonally adjusted, so we compare it with the unadjusted CPI. The EPI including apparel, a broader measure, decreased 0.3 percent in July as apparel prices fell for the third month in a row after four consecutive increases from January through April. 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).

Over the past 12 months, the EPI has risen 3.8 percent while the EPI including apparel is up 3.6 percent. 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 2.9 percent over the past 12 months. Over the last five years, the EPI is up at a 0.8 percent annualized rate compared to an average annual rise of 1.5 percent for the CPI.

Among the notable contributions to the monthly change in the EPI in July was motor fuel, which fell 1.4 percent for the month and subtracted 18 basis points from the change in the overall EPI. Apparel dropped 2.0 percent on an unadjusted basis in July. Over the past 12 months, apparel prices are up just 0.3 percent. Prescription-drug prices fell 0.9 percent in July while nonprescription drugs fell 0.6 percent.

Offsetting the declines were gains in recreational reading materials and housekeeping supplies. Prices of recreational reading materials jumped 1.7 percent in July and are up 3.3 percent over the past year. Housekeeping-supplies prices rose 0.6 percent for the month, the sixth increase in the past eight. From a year ago, housekeeping supplies are up only 1.0 percent.

Among the components with the largest weights in the EPI, food at home (20.7 percent weight) rose 0.3 percent for the month and is up 0.4 percent from a year ago, food away from home (17.0 percent) is up 0.1 percent and 2.8 percent over the past year, household fuels and utilities (13.3 percent) were down 0.1 percent last month but up 0.9 percent for the year, and motor fuel (12.9 percent) dropped 1.4 percent but is still up 25.4 percent since last July. Combined, they account for 63.8 percent of the EPI.