Panel on Reviewing Redesign Options for the

Consumer Expenditure Surveys

February 8-9, 2011 | Washington, DC

1

B U R E A U O F L A B O R S T A T I S T I C S

2 Massachusetts Avenue NE Room 3615 | Washington | DC | 20212

Phone 202.691.6959 | Fax 202.691.6999

cage.rob@bls.gov

www.bls.gov

ROB CAGE 

Division of Consumer Prices and Price Indexes 

Use of 

Consumer Expenditure Survey Data

in the Consumer Price Index
2

Agenda

 CPI Overview

Estimation methods

Data sources

 Current CPI requirements of CE

Expenditure weights for index estimation

Expenditure weights for item sample selection

Adjustments made to CE data to meet CPI needs

 Possible future CPI information needs

CPI use of CE data
3

CPI Overview

CPI use of CE data

CPI = measure of average change over time in the prices paid by 

consumers

The minimum expenditure (PtQt) on a set of consumption items (i) 

required in comparison period (t) to attain the same level of 

satisfaction or utility (U0) achieved in base period (0), divided by the 

actual expenditure (P0Q0) on those items (i) in base period (0) 

i

ii

i

UU

titi

t

i

QP

QP

C

IX

00

];0[

0

min
4

CPI Overview

CPI use of CE data

i

ii

i

UU

titi

t

i

QP

QP

C

IX

00

];0[

0

min
5

CPI Overview - Formulas

CPI use of CE data

i

ii

i UU

titi

t

i QP

QP

C

IX

00

];0[

0

min

Laspeyres Index:

Tornqvist Index:

Geometric Mean Index:

i bi

i

i bi

G

tti IX e

PQ

P

P

PQ ln

1-t

t

],1[

i

ti

i

i

t

i

i

ti

i

i

t

i

T

tti IX e

PQ

P

P

ln

PQ

P

P

ln

1-t

t 2PQ

1

1-t

t 2

1 PQ

],1[

i

i

i L i

tti IX

b1t

bt

],1[ QP

QP
6

CPI Overview - Formulas

CPI use of CE data

i

ii

i UU

titi

t

i QP

QP

C

IX

00

];0[

0

min

Laspeyres Index:

Tornqvist Index:

Geometric Mean Index:

bi

i

i

G

tti

s

IX

1-t

t

],1[

P

P

Weights

Prices

2

P

P

1

1-t

t

],1[

titi

i

i

T

tti

ss

IX

i

bi

i

bi

L

tti

s

s

IX

b

1-t

b

t

],1[

P

P

P

P

b= calendar period of expenditure weight; t = month
7

CPI Overview - Surveys

CPI use of CE data

1. Point-of-Purchase Survey (TPOPS)

 Outlet sampling frame for C&S Pricing Survey

 Primary source of weights at the basic level of index estimation

2. Pricing Survey (C&S)

 Source of prices for goods and services

3. Housing Survey (HOUSING)

 Source of prices for rent and owner’s equivalent rent

4. Consumer Expenditure Surveys (CE)

 Exclusive source of weights at aggregate level of estimation

 Also used to select the categories of items to price in C&S

BLS 

Surveys

Household 

surveys 

administered 

by Census
8

CPI Overview – Estimation Steps

CPI use of CE data

130,000 quotes BASIC

INDEXES

8,018 cells

(211 items x 38 areas)

C&S

prices

HOUSING

rents

36,000 units

AGGREGATION

WEIGHTS

CE

8,018 cells

(211 items x 38 areas)

Populations:

U, W, E

Periods:

Biennial, Monthly

Population:

U Only

Period:

Monthly
CPI Data Requirements

 Demographics

Urban non-institutional population for the CPI-U

– 88% of total U.S. population

Consumer units living in urban areas for which a 

majority of income is earned in wage-earning or 

clerical occupations for the CPI-W

– 29% of total U.S. population

Consumer units where the reference person or 

spouse is 62 years of age or older for the CPI-E

– 16% of total U.S. population

9
CPI Data Requirements

 Expenditures

Net out-of-pocket expenses for all consumer 

products and services within CPI’s scope, at the 

appropriate level of:

– Consumption detail

– Geography

– Periodicity

Acquisition approach to ‘expenditure’ definition

– Exception: Owner’s Equivalent Rent

Timeliness

– September 1 deadline for all expenditure data for the previous 

calendar year (for calculation of January indexes of the 

following year, published in February)

10
CPI Data Requirements:

Consumption Item Detail

11

Set of all consumer expenses

MG

EC

ITEM

CPI

LEVEL n CODE DESCRIPTION

Universe All consumer expenses

Market Basket Items Eligible goods and services

All CPI Items SA0 All-items

Major Group SAH Housing

Expenditure Class SEHK Appliances

Item Stratum SEHK01 Major Appliances

Entry Level Item SEHK011 Refrigerators and freezers

SEHK012 Washers and Dryers

SEHK013 Stoves and cooktops

SEHK014 Microwave ovens

Sampled quote 130,000 LG front-loading, energy-star washer

ELI

Quote
CPI Data Requirements:

Geographic Detail

12

REGION

AREA

STRATUM

CPI

LEVEL n CODE DESCRIPTION

Universe All counties in the United States

Urban counties Eligible counties w\ urban population

All CPI Areas 0000 U.S. City Average

Region 0300 South

Index Area X300 South X-size cities

Stratum B344 Norfolk, VA

and selected Fayetteville, NC

Primary Sampling Unit Greenville, NC

PSU 950 B344Norfolk, VA

PSU

Outlet

Sampled Outlet 40,000 General Store, Main St., Norfolk VA
CPI Data Requirements:

Geography

13
CPI Data Requirements:

Periodicity

 Periodicity

CPI-U (Urban population)

– Base-period expenditures required for Laspeyres index (CPI-U)

• Ideal: previous-month for ‘true’ Laspeyres

• Current: annualized expenditures from 2-year lagged biennial period

– Monthly expenditures required for Tornqvist index (C-CPI-U)

• Ideal: publish 2-3 weeks after end of calendar month

• Current: publish 14-25 months after end of calendar month; annualized 

CPI-U expenditures used in Geometric Mean index for preliminary 

versions of C-CPI-U, until final monthly weights become available

CPI-W and CPI-E

– Same periodicity requirements as CPI-U

14
CPI Data Requirements:

Item Sample Selection

 Four-year sample life:

 Each ITEM-PSU ‘cell’ has a new sample selected once every 

4 years; once initiated into the Pricing Survey, each sampled 

quote is priced monthly or bimonthly for 4 years

 Multi-step sample selection process:

 Select a sample of outlets to represent each PSU (TPOPS)

 Select ELI’s to represent each ITEM STRATA

– 70% of ITEMs are single-ELI

– 30% require ELI selection based upon expenditures (CE)

 Combine selected ELIs with selected outlets

 Select a unique, well-specified good or service (quote)

15
CPI Data Requirements:

Item Sample Selection - Example

16

ELI TITLE

 # 

Reports

(A312)

 # Reports

(South 

Region)

Share of Total 

Expenditures

Selected 

ELIs

1 HK011 Refrigerators & Freezers 19 401 14.8% 1

2 HK012 Washers & Dryers 34 661 65.9% 2

3 HK013 Ranges & Cooktops 11 215 4.6% 0

4 HK014 Microwave Ovens 14 328 14.7% 1

 ITEM = Major Appliances (HK01)

 PSU = Washington, DC (A312)

 SAMPLE ROTATED = August 2011

 OUTLET HITS = 2

 ITEM HITS = 4

 TOTAL SAMPLE SIZE = 8

CE data from years 2007 

and 2008 used to 

calculate selection 

probabilities
CPI Data Requirements:

Item Sample Selection - Example

17

 ELI = Washers and Dryers (HK012)

 CLUSTERS

 01b Washers

 02b Dryers

 SPECS (for Washers)

 Type

o Top-loading or front-loading

 Brand

 Capacity in cubic-feet

 Control interface

 Screen type

 Control types

 Manufacturer warranty

 Number of wash cycles

 Special wash cycles

 Max spin speed

 Number of water levels

 Automatic dispensers

 Washtub material

 Color

 Country of origin
CPI Data Requirements:

Adjustments

 Insufficient expenditures collected at required 

consumption item detail

 Motor Fuels

– CPI requires expenditures for 5 ELIs:

• 3 Gasoline ELIs: Regular Unleaded, Mid-grade, Premium

• 2 Alternative Fuel ELIs: Diesel, Other Motor Fuels

– Sales data from C&S Survey used to allocate CE total into the 5 required ELIs

 Food at home items

– Diary is exclusive source for 61 ITEM STRATA, but excludes trip expenses

– Global food questions from Interview used to adjust Diary reports

 Medical Care

– CPI requires net out-of-pocket expense, but outlays and reimbursements 

collected separately and unmatched in CE

– Aggregate totals for calendar year used to estimate net expense for each CU

18
CPI Data Requirements:

Adjustments

 Insufficient Sample Size

 Base-period Expenditures for CPI-U, CPI-W, and CPI-E

– Annual estimates required, for each elementary ITEM in each elementary AREA

– Currently, a two-year period is used to produce annualized CPI-U, CPI-W, and 

CPI-E expenditure weights

– Each ITEM-AREA expenditure estimate is also composite-estimated with the 

corresponding ITEM-REGION-SIZE expenditure estimate, to lower variance

 Monthly Expenditures for C-CPI-U

– Required for each elementary ITEM in each elementary AREA

– For each ITEM, data are summed to the U.S. level each month, then allocated 

into the 38 areas using rolling 12-month period allocation factors

 ELI Selection Probabilities for Item Sample Selection

– Required at the ELI-PSU level, annually

– Currently, annualized probabilities are derived at the ELI-REGION level, using 

two-years of CE data

19
CPI Data Requirements:

Sample Size

20

INTERVIEW DIARY

Interviews

Unique 

Consumer Units Diaries

Unique 

Consumer Units

CPI-U 25,520 13,111 12,758 6,890

CPI-W 7,343 3,836 4,882 2,057

CPI-E 6,655 3,283 3,517 1,752

CE sample size per year, 2007-2008

INTERVIEW DIARY

Interviews

Unique 

Consumer Units Diaries

Unique 

Consumer Units

CPI-U 672 345 336 181

CPI-W 193 101 128 54

CPI-E 175 86 93 46

Per Elementary Area:
CPI Data Requirements:

Sample Size

21

Item-AreaBiennialItem-AreaMonthly

Minimum 0 0

10% 11 0

25% 34 1

Median 50% 99 5

75% 318 16

90% 1,221 60

Maximum 24,354 1,266

% of cells with 0 reports 1.5% 15%

% of cells < 30 reports 22% 83%

Number of CE expenditure records per elementary CPI cell, 2007-2008
CPI Data Requirements:

Summary

 Weights for Index Estimation:

 Annual expenditure detail for matrix of elementary item-area 

cells:

– 211 ITEMs x 38 AREAs = 8,018 cells

– Urban (CPI-U), Wage-earner (CPI-W), and Elderly (CPI-E) populations

 Monthly expenditure detail for same elementary matrix

– Urban population only (C-CPI-U)

 Weights for Item Sample Selection:

 Annual expenditure detail for matrix of 303 ELIs x 87 PSUs

– Urban population only

22
Possible Future CPI 

Information Needs

 Use of CE to identify the frame or a portion of 

the frame of retail outlets for collection of prices 

in the C&S Pricing Survey

 Need to improve or replace the Telephone Point of Purchase 

Survey (TPOPS) 

 Possible use of the Census of Retail Trade, Centers for 

Medicare and Medicaid Services data, and other 

administrative sources for a portion of TPOPS.

 Use of CE or some other survey to collect the balance of 

retail outlet information.

23
Possible Future CPI 

Information Needs

24

 Use of CE to collect key price-determining 

characteristics (SPECS) of exactly what is 

purchased

 Process of collecting information on sales from store managers 

is difficult and burdensome

 CE data at the CLUSTER or SPEC level could absorb some of 

the burden now on the C&S respondent

 Would allow separate item sample selection for the CPI-W and 

CPI-E

 If performed in conjunction with collecting the point-ofpurchase, could permit separate outlet sample selection for 

CPI-W and CPI-E
Possible Future CPI 

Information Needs

 Sample size

 Adequate to support annual ELI-PSU expenditure detail, for 

the urban population

 Adequate to support monthly ITEM-AREA expenditure detail, 

for the urban population

 Adequate to support various demographic indexes

 Timeliness

 Ideal goal: receipt of data for calendar month (t) by the end 

of the first week of following month

25
CPI Item Weights

26

Car

 Insurance

2.04%

Fast Food

2.40%

Other 

Lodging

 2.58%

Electricity 

2.70%

Full-service

Restaurants 

2.99%

Gasoline 4.44%

New Cars 

4.93%

Rent 

5.63%

Owner's 

Equivalent Rent

 23.72%

Relative importance of CPI Item Strata, 2005-2006 Biennial Period
Relative Importance of Gasoline in Washington, DC

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12

Qb = 1999 and 2000 Qb = 2001 and 2002 Qb = 2003 and 2004

2002 2003 2004 2005 2006 2007 2008 2009

Qb = 2005 and 2006

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12

Qb = 1999 and 2000 Qb = 2001 and 2002 Qb = 2003 and 2004

2002 2003 2004 2005 2006 2007 2008 2009

Qb = 2005 and 2006

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12

Qb = 1999 and 2000 Qb = 2001 and 2002 Qb = 2003 and 2004

2002 2003 2004 2005 2006 2007 2008 2009

Qb = 2005 and 2006

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12

Qb = 1999 and 2000 Qb = 2001 and 2002 Qb = 2003 and 2004

2002 2003 2004 2005 2006 2007 2008 2009

Qb = 2005 and 2006

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12

Qb = 1999 and 2000 Qb = 2001 and 2002 Qb = 2003 and 2004

2002 2003 2004 2005 2006 2007 2008 2009

Qb = 2005 and 2006

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12 03 06 09 12

Qb = 1999 and 2000 Qb = 2001 and 2002 Qb = 2003 and 2004

2002 2003 2004 2005 2006 2007 2008 2009

Qb = 2005 and 2006

CPI-U:Laspeyres Initial C-CPI-U: Geomean Final C-CPI-U: Tornqvist

Importance of Weights
Contact Information

Rob Cage

Economist

Division of Consumer Prices

www.bls.gov/cpi/

202-691-6959

cage.rob@bls.gov