Modernizing the Consumer Price Index for the 21st Century (2022) / Chapter Skim
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4 Modernizing Difficult-to-Measure Expenditure Categories: Housing/Shelter
4 Modernizing Difficult-to-Measure Expenditure Categories: Housing/Shelter
Pages 67-81
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From page 67... ...
and using household consumption data from the national accounts could also reduce the amount of information requested of respondents. CPI staff also receive data from the CE program quarterly, which enables the quarterly publication of the final Chained Consumer Price Index 7 The relative importance of a component is its expenditure or value weight expressed as a percentage of all items within an area or an area within the United States.
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12 One reason why the index is not revised is its widespread use in escalation of payments. A00858 -- Consumer Price Index REV.indd 68 8/15/22 11:54 AM
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A00858 -- Consumer Price Index REV.indd 69 8/15/22 11:54 AM
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14 www.ons.gov.uk/economy/inflationandpriceindices/articles/consumerpriceinflationup datingweights/2017. A00858 -- Consumer Price Index REV.indd 70 8/15/22 11:54 AM
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They are recommending a variety of source data, including national accounts, to estimate expenditure shares.17 Although somewhat different from their consumer survey counter parts, PCE data underlying the national accounts also come with chal lenges in terms of their applicability to estimating CPI weights. PCE and CPI item categories are not all comparably defined.
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. 22 See "Consumer expenditures during COVID-19: An exploratory analysis of the effects of changing consumption patterns on consumer price indexes." www150.statcan.gc.ca/n1/ pub/62f0014m/62f0014m2020010-eng.htm; and "Adjusting the Consumer Price Index to the new spending realities during the pandemic," The Daily (Oct.
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From page 74... ...
In the context of market disruptions during COVID-19, Reinsdorf (2020) recommended data blending procedures for updating CPI weights to ensure that they are less distorted by rapid changes in expenditure patterns exhibited by consumers brought on by extraordinary circumstances.26 As illustrated in the Statistics Canada example above, one such approach would use credit card and other payments data to produce a complementary index of short-term price change with weights reflecting spending patterns during the pandemic.
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From page 75... ...
improve the accuracy of weights applied to specific items that the Consumer Expenditure Survey measures poorly and for which alternative data are likely more accurate. Immediate steps that can be taken to improve the accuracy of the weights used in the CPI are to incorporate alternative data to offset the clearest weaknesses of the CE described above and to use two-year rolling averages of CE weights.
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For more information, see Appendix 2A at the end of Chapter 2. A00858 -- Consumer Price Index REV.indd 76 8/15/22 11:54 AM
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Much of the challenge is in data blending -- including, for the CPI, how best to coordinate and map geographic breakdowns and product detail in a way that brings internal consistency across data sources or indexes based on different sources -- so that alternative data on consumer purchases can be used most effectively. Recommendation 3.3: With supplementing and complementing the CE data in mind, BLS should invest in collecting comprehensive data for individual spending using electronic means of payments such as credit/debit cards or other electronic payment processors (e.g., PayPal or Stripe)
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National Accounts Data Because household surveys or other, alternative sources of information on household expenditures become available with a lag, agencies gener ally use the fixed basket approach that weights current price changes with expenditure share data from an earlier period (the Lowe formula) for their featured consumer price indexes.
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describe the magnitude and direction of revisions to PCE and Gross Domestic Product. A00858 -- Consumer Price Index REV.indd 79 8/15/22 11:54 AM
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concluded that "for many purposes, it would be useful for statistical agencies to establish a continuous consumer expenditure survey." A continuously (or even monthly) updated set of weights would require a radical shift in methodology and data sources used, and any index built on such an approach would have to be assessed on an experimental basis for a significant period of time.33 Given that most statistical agencies do not have the resources to estimate representative baskets in anything close to real time, a hybrid data approach -- one in which a consumer expenditure survey is still central, but new data sources are integrated for intra-benchmark updates -- offers a particularly promising strategy.
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