Constructing a PCE-Weighted Consumer Price Index

Caitlin Blair

No 19582, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study investigates the effects of simulating the Consumer Price Index (CPI) with alternately sourced weights on the inflation experience for an average US consumer. The Bureau of Labor Statistics currently uses household spending data from the Consumer Expenditure Survey (CE) to construct expenditure category weights, or "item" weights, in the CPI. The Bureau of Economic Analysis also estimates consumer expenditures, but does so at a national level for publication of Personal Consumption Expenditures (PCE) in the National Income and Product Accounts. In this paper, 2005-2010 price indexes that utilize PCE weights instead of CE expenditure weights are compared with the CPI-Urban in order to evaluate current CPI weighting methods. These comparisons show that the annualized growth rate over five years of an adjusted PCE-weighted CPI is slightly lower than that of the CPI-U, while a reweighted index that uses PCE expenditure definitions grows much more quickly than the CPI.

JEL-codes: E31 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-mac
Note: EFG LS PE TWP
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Published as Constructing a PCE-Weighted Consumer Price Index , Caitlin Blair. in Improving the Measurement of Consumer Expenditures , Carroll, Crossley, and Sabelhaus. 2015

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