10 Years of Comparative Results: Chained vs. Regular CPI-U

• Activity Number: 316
• Type: Contributed
• Date/Time: Tuesday, August 6, 2013 : 8:30 AM to 10:20 AM
• Sponsor: Government Statistics Section
• Author(s): Owen Shoemaker*+
• Companies: Bureau of Labor Statistics
• Keywords: Tornqvist ; Superlative Index

Abstract

In February, 2013, the BLS calculated and published its twelfth annual set of C-CPI-U indexes (for the 12 months of 2011) and its eleventh annual set of C-CPI-U indexes for 12-month price changes. This paper will concentrate on the last ten years of this series. The C-CPI-U (Chained Consumer Price Index - Urban) is calculated and published every year, with a one year lag, using a Tornqvist formula, and its set of weights are updated yearly, so that a unique set of monthly weights are available for both time t as well as for time t-n. The C-CPI-U can thus be labeled a "superlative" index. By contrast the Regular CPI-U uses weights that are, at a minimum, at least two years old, and uses a combination (Hybrid) of Geomeans and Laspeyres formulas as its final estimator. The set of All-US-All-Items Chained C-CPI-U index results continue to diverge - lower, but more slowly - from Regular CPI-U index results. We investigate the nature of this divergence. We also analyze alternative methodologies for determining an adjustment factor for the Initial and Interim Chained indexes (which are not "superlative") which can best proxy for the Chained CPI-U in real, non-lagged, time.