and wrongly think that the CPI itself generally 

excludes food and energy. This article briefly 

explains what the index for all items less food 

and energy is and what it isn’t, examines its 

history, and looks at its behavior relative to 

other official CPI indexes. 

It is natural to ask why an index excluding 

food and energy, two categories of items fundamental to the market basket of virtually all 

consumers, would be of interest. The answer 

lies in the value of such an index in analyzing 

the causes and nature of inflation. Food and 

especially energy have been more volatile 

in recent years than almost everything else 

in the CPI, and their sharp short-term movements up and down can dominate the movement of the All items index, obscuring longer 

term underlying trends or important changes 

in other categories. Additionally, food and 

energy prices are more subject to significant “shocks” than prices of other goods and 

services. Inflation due largely to higher food 

or energy prices might have different policy 

implications than broader inflation. 

The index for all items less food and energy 

had its inception during an era in which 

inflation was a major economic problem and 

policy issue. Although wage and price controls were initiated in 1971 in an attempt to 

control persistent inflation, the CPI, in 1973, 

recorded its largest increase since 1947. ReThe Consumer Price Index is, in fact, a large 

family of indexes with thousands of indexes 

published each month. The broadest measure 

of inflation, called the All items CPI, includes all 

goods and services that consumers purchase. It 

is the “All items” CPI that is used in Social Security cost of living adjustments (COLAs), and to 

adjust federal income tax brackets. Besides the 

All items index, the Bureau of Labor Statistics 

(BLS) publishes CPIs for many categories of 

goods, including eight major groups and hundreds of narrower categories of goods and services. In addition, the CPI also publishes many 

“special aggregates.” These include the energy 

index, indexes for commodities and services, 

and a number of indexes that exclude particular categories, such as all items less shelter and 

all items less medical care. These special aggregates are not tied to any legislation or used to 

adjust official payments.1

One of these special aggregates, the CPI for all 

items less food and energy, probably receives 

more attention than any other consumer price 

index. Indeed, it gets so much attention that 

some people confuse it with the All items CPI, 

Current Price Topics

The So-called”Core” 

Index: History and Uses 

of the Index for All Items 

Less Food and Energy

1

Consumer Price Index: Fouth Quarter 2010

U.S. Bureau of Labor Statistics February 2011 Volume 1, Number 15
2

ferring to inflation in 1973, the January 1974 

Annual Report of the Council of Economic 

Advisers said:

“There is no simple explanation for this price 

behavior which was the most extraordinary in 

almost a generation and which confounded 

the Council and most other economists alike. 

The simultaneous upsurge in demand in the 

United States and in foreign countries, the 

shortfall in agricultural production of 1972 

and early 1973, the decline in the international exchange value of the dollar, the unexpected capacity problems in materials industries, the increases in petroleum prices late in 

the year as a result of the Arab oil embargo, 

the shifting character of domestic price controls—all of these tell part of the story of last 

year’s inflation.”2

Policymakers were grasping to understand inflation and its causes. Clearly food and energy 

shocks were among the causes of the inflation. Energy prices had increased 17 percent 

during 1973, and food prices had risen over 

20 percent. In 1957, the CPI created an index 

for all items less food in recognition of the 

volatility in food prices due to seasonal and 

weather-related factors. The Cost of Living 

Council, the body charged with administering 

wage and price controls, requested an index 

that excluded energy as well. The index for all 

items less food and energy was first published 

in April 1977. A historical series was created 

extending back to 1957. As it turns out, excluding food and energy, prices had risen less 

than 5 percent during 1973.

The index for all items less food and energy is 

often unofficially referred to as the “core” CPI, a 

term created by the media and not the Bureau 

of Labor Statistics. In fact, details of what should 

be excluded in an index designed to measure 

this core inflation are not obvious. For example, 

nonalcoholic beverages are considered part of 

food in the CPI and are thus excluded from this 

core index, but alcoholic beverages are not. 

Food away from home is also excluded from 

this core index, although it is not a volatile index 

at all. Other indexes, such as apparel, are relatively volatile but are included in this index for 

all items less food and energy. Though it gets a 

lot of attention, this index for all items less food 

and energy is just one of many indexes that can 

be considered by analysts and policymakers in 

evaluating price change.

How has this core index behaved? As could be 

expected, it has been less volatile than the all 

items index. Over the long run, however, the 

increase in the index excluding food and energy has gone up about the same amount as the 

overall measure that includes food and energy. 

After 1982 (a recession year that marked the 

end of a period of high inflation), the similarities have been striking. (See table 1.)

To some degree, this is an intuitive result; 

energy is an important input in production, 

and it is to be expected that energy prices 

 C U R R E N T P R I C E T O P I C S
3

will exert an influence on other prices in the 

long run. Of course, for various shorter time 

periods the movement of the indexes may be 

very different. From December 2001 to July 

2008, for example, the all items index rose at 

a 3.4-percent annual rate, compared with 2.2 

percent excluding food and energy, as energy 

increased at a 15.1-percent annual rate during 

that time. (See chart 1.)

The index excluding food and energy did not 

rise above 3 percent or fall below 1 percent 

from June 1995 through March 2010; the 

October 2010 figure of 0.6 percent was 

the lowest in the history of the index. The 

12-month change of the All items

index during this same time period rose as high 

as 5.6 percent and fell as low as −2.1 percent.

In conclusion, the index for all items less

food and energy is one of many indexes

produced by the CPI that are used for analyzing the nature and source of inflation primarily in the short run. This index is not tied

to any laws or used to adjust official payments. It is typically less volatile than the All 

Items CPI, though it has increased at a similar 

rate in the long run.

Table 1. Percent change, total and annualized for selected categories, December 

1982–December 2010

Category Total

change Annualized

All items 124.6 2.93

Food 126.4 2.96

Energy 117.7 2.82

All items less food 

and energy 128.2 2.99

 C U R R E N T P R I C E T O P I C S

-4

-2

0

2

4

6

8

10

12

14

16

1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

All items All items less food and energy

Chart 1. Twelve-month percent change, all items and all items less food and energy 

January 1977–December 2010

SOURCE: U.S. Bureau of Labor Statistics

Percent change

Chart 1. Twelve-month percent change, All items and all items less food and energy,

January 1977–December 2010

Percent change
Food price change was in line with overall 

inflation for 2010. (See chart 2.)

All items less food and energy

The index for all items less food and energy 

rose 0.8 percent in 2010, after increasing 1.8 

percent in 2009. This is the smallest calendaryear change ever recorded in the all items less 

food and energy index. From 1999 to 2009, 

this index increased at an annual rate of 2.1 

percent, more than double the increase of 

2010. The index showed slow growth in the 

latter three quarters of 2010, after falling in 

the first quarter. 

The driving force behind the deceleration in 

the index for all items less food and energy 

was the shelter index, which followed a historically low increase of 0.3 percent in 2009, with 

a 0.4-percent increase in 2010. Shelter makes 

All items

The All Items Consumer Price Index for All 

Urban Consumers (CPI-U) increased 1.5 percent in 2010, after increasing 2.7 percent in 

2009. In the fourth quarter of 2010, the index 

increased at a 3.5-percent seasonally adjusted 

annual rate (SAAR).

Despite a considerable increase in the energy

index during the second half of the year, overall price change for the year 2010 was moderate. A historically low increase in the index for 

all items less food and energy was coupled 

with a significant increase in energy prices. 

4

 C U R R E N T P R I C E T R E N D S

Current Price Trends

Energy Prices up in 2010;

Consumer Inflation for Most 

Other Categories Modest

2.7

-0.5

18.2

1.5 1.5 1.8

7.7

0.8

3.5

1.6

33.9

0.7

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

All Items Food Energy All items less food and 

energy

Percent change

2009 change, not seasonally adjusted

2010 change, not seasopnally adjusted 

2010 4th quarter change, seasonally adjusted annual rate

Chart 2. CPI-U percent changes: all items, food, energy, and all items less food and energy for 2009, 2010 

and fourth quarter 2010

SOURCE: U.S. Bureau of Labor Statistics

Chart 2. CPI-U percent changes: All items, food, energy, and all items less food and

energy for 2009, 2010, and fourth quarter 2010

Percent change

2010 change, not seasonally adjusted

2010 4th quarter change, seasonally adjusted annual rate

2009 change, not seasonally adjusted

All items Food Energy All items less food and

energy
up roughly 40 percent of the all items less 

food and energy market basket. In the fourth 

quarter, shelter increased at a 1.2-percent annualized rate, the highest quarterly increase 

for the year, and a three-fold increase over its 

third quarter rate.

From 1996 through 2006, the shelter index 

increased at an annual rate of 3.2 percent. In 

recent years, shelter inflation has decelerated. 

The 12-month changes in shelter for 2007, 

2008, 2009, and 2010 were 3.1, 1.9, 0.3, and 

0.4 percent, respectively. This index showed 

negative running 12-month changes for the 

first 10 months of 2010, before turning positive in November. The January 2010 12-month 

decrease of 0.1 percent was the first negative 

change in the shelter index since the inception of this index in 1952, and its December 

2010 level remains below its July 2009 peak.

Within shelter, owners’ equivalent rent increased 0.3 percent, following a 2009 change 

of 0.7 percent. These past 2 calendar years 

have produced the smallest increases in the 

measure of owner-occupied housing prices 

ever recorded. Rent of primary residence also 

increased moderately, rising 0.8 percent in 

2010, in line with its 2009 change of 0.7 percent. Rent inflation accelerated throughout 

2010, culminating in a 2.0-percent SAAR for 

the fourth quarter.

Lodging away from home declined in the 

fourth quarter, falling at a 3.6-percent SAAR, 

but still finished the year at 2.5 percent above 

its 2009 value because of a strong second 

quarter increase. Other lodging away from 

home including hotels and motels increased 

2.0 percent in 2010, and was a major contributing factor behind the fourth quarter decline in lodging away from home, falling at a 

5.4-percent rate over that period.

Among the remaining major components 

of the all items less food and energy index, 

medical care had the largest increase in 2010, 

jumping 3.3 percent, similar to its increase 

of 3.4 percent in 2009. In the fourth quarter, 

medical care increased at a more moderate 

1.9-percent rate. Within medical care, the 

hospital services index jumped 7.6 percent 

in 2010, and accounted for about half of the 

overall increase in medical care.

Several important components of the all items 

less food and energy index either declined or 

remained flat in 2010. Apparel, which fell 1.1 

percent, suffered its largest drop since 2005. 

The recreation index dropped 0.8 percent, and 

services excluding energy services increased 

1.3 percent. Both were the smallest December 

12-month changes ever recorded for those 

indexes. The education index increased 3.9 

percent, its smallest jump ever, due in part to 

slow growth in the college tuition and fees index, which increased 4.1 percent in 2010, after 

jumping 6.0 percent in 2009. Household furnishings and operations declined at a 1.1-percent SAAR in the fourth quarter of 2010, 

continuing the trend established over the first 

5

 C U R R E N T P R I C E T R E N D S
9 months of the year. The index finished the 

year 2.5 percent lower than the index in 2009. 

Airline fares rose at a 29.0-percent rate in the 

fourth quarter, after declining at a 4.6-percent 

rate in the third quarter. All told, airline fares 

increased 5.8 percent in 2010, after rising 4.3 

percent in 2009. The communication index 

fell 1.1 percent for the year, after declining 

at a 3.3-percent rate in the fourth quarter. 

The index was led by falling prices for wireless telephone services, which dropped at a 

7.0-percent rate in the fourth quarter and 3.6 

percent for the full year.

The rate of inflation for all items less food and 

energy continued its trend of deceleration 

in the fourth quarter of 2010, increasing at a 

0.7-percent SAAR and matching its rate for the 

third quarter. During the first half of 2010, the 

index increased at a 0.6-percent rate. The 1-year 

change for all items less food and energy has 

not eclipsed 2 percent since November of 2008.

Energy

The energy index rose 7.7 percent in 2010, 

after increasing 18.2 percent in 2009. Energy 

prices trended upward throughout the second half of 2010, after volatile movement in 

the first two quarters of the year. The index 

climbed 9.2 percent SAAR in the first quarter 

of 2010 and declined sharply at a 25.7-percent 

SAAR in the second quarter. The fourth quarter saw the energy index jump at 33.9-percent 

clip, following a 24.5-percent rate increase in 

the third quarter.

Within the energy component, the gasoline 

index continued its steep upward trend in 

the fourth quarter of 2010, rising sharply 

at a 70.1-percent SAAR after increasing at 

a 48.8-percent rate in the third quarter. The 

2010 increase of 13.8 percent was almost 

double the annualized increase for the preceding 10 years.

Household energy prices crept up 0.8 percent 

in 2010, after falling 4.9 percent in 2009. The 

index increased at a 3.5-percent SAAR in the 

fourth quarter. Both the major components of 

household energy rose in the fourth quarter, 

in spite of some volatile movement within 

those components. Most notably, the fuel oil 

index surged upward at a 71.2-percent rate for 

the fourth quarter. For the year, fuel oil prices 

jumped 16.5 percent, accounting for roughly 

90 percent of the increase in the household 

energy index. The natural gas index fell at an 

18.1-percent SAAR in the fourth quarter, after 

increasing at a 1.8-percent rate in the third 

quarter. For the year, the natural gas index 

fell 2.8 percent, after a precipitous 18.1-percent drop in 2009. The electricity index rose 

0.7 percent in 2010, following its moderate 

decrease of 0.5 percent in 2009. The index 

jumped at a 6.4-percent rate in the fourth 

quarter of 2010.

Gasoline prices continued their upward trend 

in 2010, increasing 13.8 percent for the year, 

after a 53.5-percent increase in 2009. Gas 

prices dropped at an 18.5-percent rate in the 

6

 C U R R E N T P R I C E T R E N D S
first half of 2010, but jumped at a 59.1-percent 

rate during the second half. Gasoline prices 

are steadily regaining the ground they lost 

in 2008, when they bottomed out at $1.74 

per gallon in December. Prices now stand at 

$3.03 per gallon, 26.8 percent shy of their July 

2008 peak. Crude oil prices in 2010 peaked at 

$87.51 per barrel in December, their highest 

recorded price since October 2008.3

Food

Food price change was in line with overall 

inflation in 2010, increasing 1.5 percent after 

a 0.5-percent drop in 2009. The fourth quarter 

saw food prices jump at a 1.6-percent rate, 

consistent with its movement over the first 9 

months of the year, when the index increased 

at 1.5-percent rate. Grocery store food prices 

increased 1.7 percent in 2010, after falling 2.4 

percent in 2009. Of the six major grocery store 

food groups, the meats, poultry, fish, and eggs 

group increased the most in 2010, jumping 

5.5 percent, its largest increase since 2003. 

This increases accounted for about threequarters of the total increase in grocery store 

prices. Pork products accounted for about a 

third of the 2010 jump in the meats, poultry, 

fish and eggs category, as prices for bacon 

and breakfast sausages rose 13.7 percent and 

8.4 percent, respectively.

All other food at home groups increased in 

2010, with the exception of cereals and bakery products, which dropped 0.2 percent, and 

nonalcoholic beverages, which dropped by 

1.2 percent. Dairy products increased 3.7 percent in 2010. The fruits and vegetables index 

showed a 1.4-percent increase for the year, 

and 3.9 percent in the fourth quarter. (See 

chart 3.)

7

 C U R R E N T P R I C E T R E N D S

-3

-2

-1

0

1

2

3

4

5

6

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

2008 2009 2010

Percent change

All items All items less food and energy

Chart 3. Twelve-month percent change, all items and all items less food and energy, 

January 2008–December 2010

SOURCE: U.S. Bureau of Labor Statistics

Chart 3. Twelve-month percent change, All items and all items less food and energy,

January 2008–December 2010

Percent change
8

 C U R R E N T P R I C E T R E N D S

Food away from home prices increased 1.3 

percent in 2010, following a 1.9-percent increase in 2009. The index showed moderate, 

yet consistent, increases in each of the four 

quarters in 2010. Food at employee sites and 

schools rose 2.5 percent in 2010, but the food 

away from home index was moved largely 

by the full service meals and snacks index, 

which increased 1.3 percent, and the limited 

service meals and snacks index, which rose 

1.0 percent. By itself, the full service meals and 

snacks index accounted for about half of the 

food away from home increase.

Notes

1 See John S. Greenlees and Robert B. McClelland, “Addressing Misconceptions about the Consumer Price Index,” Monthly Labor 

Review (August 2008), pp. 3-19.

2 U.S. Council of Economic Advisers, The Annual Report of the Council of Economic Advisers, 1974 (Washington D.C., GPO, 1974), 

p. 65.

3 Energy Information Administration; see http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm (visited January 14, 2011).

Price movements described in this text reflect data as released on January 14, 2011. All 

12-month and longer percent changes reflect 

not seasonally adjusted data except as noted. 

Percent changes covering less than a year are 

based on seasonally adjusted annual rates, 

unless otherwise noted. CPI seasonally adjusted indexes and percent changes are subject 

to annual revision. 

Additional information is available from the 

CPI Information and Analysis section, at cpi_

info@bls.gov or (202) 691-7000.