Commodity prices and the Consumer Price Index
May 22, 2012
From 2003 to 2008, prices for commodity crops increased 83 percent and prices for oil and natural gas increased 232 percent. A recent article in the Monthly Labor Review, "Impact of commodity price movements on CPI inflation," explores the effects of price changes in commodity crops and oil and natural gas and two other commodity groups (animal slaughter and processing and dairy) on the Consumer Price Index (CPI) for various final goods, and on overall CPI consumer inflation, during the 2003–2008 period.
Although crop prices exhibited major movements in recent years, their impact on consumer prices was limited: even though crop prices increased by 83 percent from 2003 to 2008, the change in the CPI for all items was less than 20 percent over the same period. Although broad measures of price change were minimally affected by crop price movements, the increase in crop prices substantially affected the CPI for food and beverages. During this period, the CPI for food and beverages increased 21 percent.
The increase in animal slaughter and processing prices (26 percent) was much lower than the increase in crop prices. Although animal slaughter and processing price movements affected broad CPI measures only minimally, they had a substantial impact on the CPI for food and beverages.
In 2003–2008, dairy prices rose 34 percent, substantially affecting the CPI for food and beverages.
From 2003 through 2008 oil and gas prices increased 232 percent. Rising oil and gas prices accounted for more than 25 percent of the change in the all-items CPI from 2003 to 2008. Many different CPI categories were affected considerably by rising oil and gas prices, but the three categories affected most from 2003 through 2008 were transportation, motor fuels (which increased 140 percent and is included in the transportation category), and fuels and utilities (which increased 53 percent and is included in the housing category).
Data for this article are from the Producer Price Index and Consumer Price Index programs. To learn more, see "Impact of commodity price movements on CPI inflation," in the April 2012 issue of the Monthly Labor Review.
Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Commodity prices and the Consumer Price Index on the Internet at http://www.bls.gov/opub/ted/2012/ted_20120522.htm (visited March 31, 2015).
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