Analyzing the Sensitivity of PPI Industry Indexes to the Effects of Extreme Item Weight Values

• Activity Number: 399
• Type: Contributed
• Date/Time: Tuesday, August 5, 2014 : 2:00 PM to 3:50 PM
• Sponsor: Government Statistics Section
• Author(s): Andy Sadler*+
• Companies: Bureau of Labor Statistics
• Keywords: Unweighted 6-digit NAICS industry index ; Item weight

Abstract

This paper investigates and reports the effects of extreme item weight values on 6-digit NAICS industry indexes in the PPI. Unweighted 6-digit NAICS industry indexes -- which are used as a proxy for weighted 6-digit NAICS industry indexes -- are calculated with and without extreme item weight values. These indexes are then compared to determine if extreme item weights have a statistically significant effect on PPI industry indexes. The results show that very few PPI industry indexes are affected by extreme item weights and that PPI indexes are robust to their presence. These results offer key insight(s) into which industries are susceptible to mistakes in the collection and input of data used for index calculation.