The Consumer Ex

p 

enditure Sur

in Comparison: Focus on PersonConsumption Expenditures Consumption Expenditures

Federal Economic Statistics Advisory Committee MeBureau of Labor StatisticsWashington, D.C.March 21 2003March 21, 2003
Outline

O i verv ewRecent DevelopmentsCurrent/Future ResearchData Comparisons Data Comparisons
Overview of the Consumer 

E pendit re S r e E

xpendit

ure

S

u

r

v

e

y

The CE produces annual information 

The CE produces annual information 

buying habits of consumers living in 

US; including data on their expenditUS; including data on their expendit

income, and socio-demographic 

characteristics. 
Sample Size Sample Size

 The data are collected in independent qua

The data are collected in independent qua

Interview and weekly Diary surveys. 

 Interview Survey information is obtained 

approximately 7 500 households (5 000 papproximately 7,500 households (5,000 p

1999) each quarter. 

 Diary y Surve information is collected fro

annual sample of another 7,500 householeach fill out two weekly diaries.

 This is an effective annual sample size fo

This is an effective annual sample size fo

publication purposes of 30,000 cases for Iand 15,000 cases for Diary.
Population Coverage Population Coverage

The survey uses a national probabili

The survey uses

a national probabili

sample based on decennial census d

augmented by new construction permaugmented by new construction perm

The survey targets the total urban an

noni i i li d US l i ( 

inst

itut

ionalize

d US popu

lat

ion 

(

excluding those living on military ba

Issues we need to consider when 

improving data quality: improving data quality:

Respondent burden and confideConsumer non-response

Recall 

Non-response to specific quProxi reporting

Uses and CustomersCost
Recent Developments Recent Developments

Introduction of income brackets - 2002Introduction of the Computer Assisted Introduction of the Computer Assisted

Personal Interview instrument – Apri

2003.

Redesign of the Diary Instrument

with i l t ti h d l d f ith

imp

lemen

t

ation sc

h

e

d

u

l

e

d

for 

January 2004.
Ongoing Work Ongoing Work

 Comparison of CE and PCE aggregate 

expenditures

 Global vs. detailed questions AC Nielsen research AC Nielsen research

– household scanner 

household scanner 

 Future Diary research and a study of indiv

member spending member spending

 Issues of income non-response
Primary Interest in PCE Primary Interest in PCE

Used for source selection for integra

Used for source selection for integra

published data (Diary or Interview)

Publish comparisons in biennial Publish comparisons in biennial

publications

Monitor consistency of results Monitor consistency of resultsHelp identify areas where CE data 

collection and methods might be impcollection and methods might be imp

by understanding the differences
Comparing CE Expenditur

Estimates with Data from OtEstimates with Data from Ot

Sources

Focus: 

Personal Consumption Expenditu

of the National Income and Prod

Accounts
Data Comparisons Data Comparisons

 Health Care Financing Administration Health Care Financing Administration

– National Health Expenditures

 Department of Energy

– Residential Energy Consumption Survey

– Residential Transportation Energy Consu

Survey

 Progressive Grocer/Supermarket Busin Health Care Quality and Research Agenc

– Medical Expenditure Panel Survey (House

Medical Expenditure Panel Survey (House

 Bureau of Economic Analysis (BEA)

– Personal Consum

ption Ex

penditures 

(PCE

p p (
Since the Start of the Ongoing CE Since the Start of the Ongoing CE

“What was expected from these compar

was a sense of degree and direction was

a sense of degree and direction 

possible survey errors, rather than an 

measure of bias because the specifmeasure of bias, because the specif

estimates from other sources are n

necessarily the necessarily the ‘true’ values

”

(Gieseman 1987 p 9)(Gieseman 1987, 

p. 9)
PCE: Primary Source of Independ

Data for Comparison O er Time Data for Comparison

O

ver Time

Used for source selection for integra

Used for source selection for integra

published data (Diary or Interview)

P bli h i i bi i l P

ubli

s

h compar

isons 

in bienn

i

a

l

publications

Monitor consistenc

y of results

Hel

p y identify areas where CE data 

collection and methods might be imp
CE and PCE Compared CE and PCE Compared

 Current methodology Current methodology (Gieseman 1987; Branch 1

(Gieseman 1987; Branch 1

CE bulletins and reports beginning in 1990)

– Type by expenditure (food, apparel, housing, – T d ti i ti Tren

ds over time 

in ratios 

» 1984-2000

 Re-examination and evaluation (April 2000 t

– Type by product (durables, non-durables, ser– CE and PCE aggregates and ratios CE and PCE aggregates and ratios

» 1992, 1997, 2000

– Concerns and issues– Detailed example: Apparel
Major Findings from Re Major Findings from Re

-e al atio

e

val

uatio

– After adj py ustments for com

parability, CE/PCE 

» 0.89 for 1992 (vs. 0.66 unadjusted)» 0.80 for 1997 and 2000 (vs. 0.64 and 0.60 unadjus

– Rental value of dwellings and new autos CE 

aggregates greater than PCE

– F h i CE l h 

For most ot

her 

items, CE aggregates 

lower t

h

and ratios decreasing over time

– E l ti xp

lanations

» some can be explained» others need more work to understand 
Making Comparisons:

I t C id Issues 

to 

Consider 

 Populations Expenditures (publication vs. “comparabl

– Underlying conceptual framework (scope) – Definition

 Sources of data

– Censuses– Surveys– Ad i i t ti d Ad

m

i

n

i

s

trative recor

d

s

– Trade association publications 

 Periodicity

– Collection, reference, production 
Populations

 CE: consumer units consumer units  PCE: persons res

and persons

– Civilian non-institutional 

 PCE: persons res

– Individuals

» Persons resident in 

th h h i 

population and some institutional

– Continental U.S., Alaska, 

those who physica

U.S. and have resito reside in U.S. fomore

and Hawaii

– Urban and Rural

» Employees of U.S

abroad for 1 year o

» U.S. government c

N b f 2 1% l military personnel 

abroad regardless 

– Nonprofit institution

i di id l

Numbers of persons 2.1% less

than represented by PCE

individuals
Definition: CE Publication Definition: CE Publication

 What consumers spend: transaction costs includ

What consumers spend: transaction costs includ

and sales taxes of goods and services acquired dreference period

– Primarily out-ofpocket expenditures (OOP) reported 

consumers plus value of in-kind food and rent as pay, and food stamps

 In scope for CE, out of scope for PCE

– Transactions between households 

( p

includes 

person to 

such as for used vehicles, apparel, etc.)

– Life and personal insurance, and pensions
Definition: PCE Definition: PCE

 Value of goods and services purchased by the pe

Value of goods and services purchased by the pe

sector (excludes intra-sector transactions) includand sales taxes 

– Spent b i di id l by indi

viduals

– Operating expenses of nonprofit institutions serving individ– Value of food, fuel, clothing, rent of dwellings, and financia

recei d i ki d b i di id l d t h f d 

ive

d in ki

n

d

by indi

viduals; an

d ne

t purc

hases o

f use

d g

 In scope for PCE, out of scope for CE publicatio

– Rental value of owner occupied dwellings and owned applia– Value of home production for own consumption on farms – Standard clothing issued to military– Services furnished without payment by financial intermedia

life insurance carriers
Scope/Definition

Partly Out Of Scope For CE / Part

Partly Out Of Scope For CE

/ Part

Defined Quite Differently 

– Medicare Care Expenditures Medicare Care Expenditures– Religious and Welfare

Defined Quite Differently

– Education Expenditures Education Expenditures– Life and Personal Insurance and Pension – Owner-Occu

pied Housin

g Ex

penditures 

p gp
Data So rces and Periodicit Data So

urces and Periodicit

y

 CE: direct

H h ld S

 PCE: indirect (commodit

–

House

h

old

Surveys tl id l)

» Interview» Diary 

Periodicity

mostly residual)

– Sources

» Government statistical re

– Periodicity G t d i i t ti 

» Annual» Quarterly» Monthly

»

Government a

d

ministrati

regulatory agency reports

» Reports from private orga» CE (motor vehicle leasin

g 

» Monthly» Weekly

– Sampling and 

non-sam

plin

g errors

( g

taxis, nursery schools, ch

– Periodicity

» 5-year Benchmark (detail

p g

– Imputation/allocation » Annual » Quarterly

» Monthly

I t l ti / t l ti

–

I

n

terpo

l

ation

/ex

trapo

l

ati

– Expert judgment– Revisions
Current Methodology: 

CE to PCE P blished Ratios CE to PCE

P

ublished Ratios

 Classification scheme: Classification scheme:

– Type by expenditure– CE into PCE

 Benchmark: 1992 PCE Categories: selected Years: 1984 to 2000
CE to PCE Ratios: 

A erages O er Time A

verages

O

ver Time

0.81.01.20 20.40.60.00.2

otal food

beverages

s, related

perations

el G & S

portation

tainment

onal care

Reading

cco prod.

l

Tot

Alcoholic bev

Rent, utilities,

HH ope

Apparel

Transpo

Enterta

Person

Re

Tobacc

Miscel

1984 to 2000 1992 to 2000
Stable Higher Ratios Stable, Higher Ratios

Rent, Utilities, and Public Services Vehicle Purc

1 01.2

1.01.2

0.60.81.0

0.60.81.0

0.20.40.6

0.20.4

1984

1986

1988

1990

1992

1994

1984

1986

1988

1990

1992

1994

1996

1998

2000

1992 benchmark1987 benchmark
Stable/Decreasing Mid Ratio Stable/Decreasing, Mid Ratio

Entertainment

Televisions, Radios, Sound Equipment

1.20 60.81.00.20.40.6

4

5

6

7

8

9

0

1

2

3

4

5

6

7

8

9

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

20

1992 benchmark1987 benchmark
Decreasing Lower Ratios Decreasing, Lower Ratios

Apparel and Services Apparel and Services Other Apparel 

1 01.2

Other Apparel

1.01.2

0 60.81.0

0 60.81.0

0.40.6

0.40.6

0.2

1984

1986

1988

1990

1992

1994

1996

1998

2000

0.2

1984

1986

1988

1990

1992

1994

1992 benchmark1987 benchmark
Others Have Been 

Watching and Using Watching and Using

...

 Economic Growth Economic Growth

– Slesnick (1992, 1998)– Triplett (1997) 

 C ti b d f t Consumption 

base

d measure o

f pover

t

y

– GAO (1996) report on Slesnick (1993)

 CE in the production of the CPI CE in the production of the CPI

– Fixler and Jaditz (2002)– Johnson and Greenlees (2003)– L b d R dd (2003) L

e

bow an

d

R

udd (2003)

– National Research Council (2002)
Calls for Further Examination 

with Ca tion ith Ca

ution

 Slesnick 

( ) 1992

)

– remaining differences “is a mystery that can only be r

future investigation.” 

– “...suggest caution is in order before one assigns full 

und ti i th CEX derreporting in the CEX.” [d t it d f PCE 

[due 

to magnit

u

de o

f PCE r

 Triplett (1997)

–

“

...individual components of PCE and CE have been 

individual components of PCE and CE have been 

little to permit conclusions about which is better ...”

 GAO report (1996) referring to 1994 BEA study

– “...more than half [of the differences in the aggregate exp

was traceable to coverage and definitional differencesremainder due to statistical differences.”
Call For Further Examination Call For Further Examination



National Research Council 

( ) 2002

)

– “On the basis of available evidence, it is unclear whet

or CEX weights are superior...It is an open question aaccuratelyp g ex enditure cate

gories can be mapp f ed 

from 

CEX. We are not in a position to advocate one set of wthe other, but the question certainly warrants further investigation” But then go on to say...

– “The panel concluded that it is likely that the CEX est

consumer expenditure shares are biased, perhaps seri
Re-examination

 Classification:

– Type by product (durables, non-durables, serv– CE into PCE – PCE Bridge to 1992 Input-Output Table

 Benchmark: 1992 Categories

– All– Redefined “comparable” Redefined “comparable”

» e.g., drop used vehicles; include owned dwellings 

 Years: 1992, 1997, 2000
CE Integrated/Personal Consumpt

E pendit res Ratios: E

xpendit

ures Ratios: C bl omparables

1.001.20 1992 1997 20000.600.800.200.400.00

all comparable all comparable all comparable all c

All items Durables Nondurables Serv
Comparable Non-farm 

O ner w

-Occ pied D elli

Occ

upied

D

welli

$1 000 1 16

$800

$1,000

1.121.141.16

lars

$400$600

1.061.081.10

ons of doll

$0

$200

2

4

6

8

0

1.021.04

92

94

96

Billio

1992

1994

1996

1998

2000

CE PCE

1992

1994

1996

CE/PCE 

With adjustment for the implicit rental value of appliances 
CE to PCE Aggregate E pendit r

CE to PCE Aggregate

E

xpendit

ur

1992 

( ) billions

) 1992 

( ) billions

) 

Total CE $2,788 $3,553 Total PCE $4,210 $5,529 

% Total 66% 64% 

Total CE Comparable

$2,107 $2,490 

Total PCE Comparable

$2,369 $3,117 

% Comparable % Comparable 89% 80% 

CE Comparable as % of CE Total

76% 70% 

PCE C bl 56% 56% PCE

Comparable as 

% of PCE Total

56% 56% 
Issues to Consider: CE vs PCE Issues to Consider: CE vs. PCE

 Populations differ Populations differ Expenditures: concept / scope, definition Collection / Sources of data  Sources of error

– CE

» M i easurement errors assoc

iate

d w

i

t

h surveys

» Processing imputation / allocation

– PCE

» Expert judgment» Interpolation / extrapolation» Measurement errors associated with surveys (non

-

Measurement errors associated with surveys (non 

 PCE revisions
Analytical Example Analytical Example

1992 E dit f A 1992

Expenditures 

for 

Appa

in the CE and PCE in the CE and PCE
R ti l f Y d E dit C 

R

ationa

le 

for 

Year an

d

Expenditure 

C

Why 1992? Why 1992?

– Data represent latest benchmark year at time – Benchmark data are available at finer level o

detail

Wh l?y apparel?

– The difference between aggregate CE and PC

es a es s e a ve y a ge tim

a

tes i

s r

e

l

ative

l

y l

a

rge

– The trend in the ratio of CE to PCE estimate

demonstrated a continuous decline over time
Expenditures for apparel, total and by maj

item cate

gor

y, 1992 CE d PCE CE an

d PCE

Item category

Annual expenditu

(millions of dollar

CE Total

b l

$143,970

Men’s & 

boys’ apparel $

Women’s & girls’ apparel

Apparel for children under 2

$4

6

Footwea

r 2

PCE Total

Cl thi f l

$212,259

Cl

othing 

for males $6

Clothing for femalesClothing for infants

Sh

$610

3

Shoes 3
Derivation of CE Estimates Derivation of CE Estimates

 Diary survey is the source for about 63 per

aggregate apparel expenditures, while the Interview survey accounts for the remaininInterview survey accounts for the remainin

percent

 Individual ex

p pg enditure re

ports ori

ginate in 

ways.

– Directly reported by respondent– All ti f dit h d t 

Allocation o

f expenditures w

here respon

den

t r

expenditure for a combination of items

– Imputation of expenditures where respondent

acknowledges purchase, but does not provide 
Derivation of PCE Estimates Derivation of PCE Estimates

 Process uses data created for preparation o

output accounts for U. S.

 The benchmark purchasers’ value of goods 

services is calculated to determine allocabservices is calculated to determine allocaboutput.

 Total purchasers’ value is allocated among

intermediate and end users.
Amount of value added to total apparel 

esti b f 1992 PCE imate by

factor, 1992 PCE

Factor

Value added

(millions of dollars) (millions of dollars)

Total $238,843

Basic value

Wholesale margin

$119,114

Wholesale margin 21 286Transportation costWholesale taxes

21,286

3,369

163

Retail marginRetail taxes

84,86010,051
Production and allocation of apparel, 1992 

A ( ccounts 

(millions of dollars)

Basic 

l

Whole.

i

Trans. Comm & 

h l

Retail 

i

Production value margin cost w

h

ole. taxes margin 

Shipments Adjustments: 

Secondary production 103

65,605

Nonemployer receipts Filer misreporting 

receipts 

Nonemployer

misreporting receipts 

394

6835 600

Adjusted shipmentsHandling charges of mail order

houses and mailing of gifts

66,205

174

Allocable shi

pments 66,379 21,286 3,369 163 84,860 

Imports Adjustments:

Census re-exports NIPA territorial adj. to imports 

51,778

-183

1,140

Allocable imports 52,735 Allocable shipments & imports 119,114 21,286 3,369 163 84,860 
Production and allocation of apparel, 1992 

Accounts 

– cont. 

(millions of dollars)

Allocation of Production

Basic 

value

Whole.

margin

Trans. 

cost

Comm & 

whole. taxes

Retail 

margin

R

t

Exports

Intermediate production

5,4224 934

1,2573 609

356

1 937

2

27

Intermediate production Government purchases & sales –

Federal

Government purchases & sales – State

& local

4,934

625

1,607

3,609

111

295

1,937

1753

27

14

Change in intermediate goods

inventories

Unspecified costsChange in wholesale inventoriesChan

ge in retail inventories

44

1,768

841

3,260

11

253148460

9

272836

1234

g 

Gross private fixed investmentUnallocated output

-337

290

151

35

5418

62
Production and allocation of apparel, 1992 

Accounts 

– cont. 

(millions of dollars)

Allocation of Production

Basic 

value

Whole.

margin

Trans. 

cost

Comm & 

whole. taxes

Retail 

margin

R

t

PCE Clocks, Lamps & Artwork

PCE Sporting Equipment

45

3

01

00

00

12

PCE Sporting EquipmentPCE Vehicle Accessories & PartsPCE Jewelry & WatchesPCE Lighting SuppliesPCE Other Personal Hygiene Products

3

-65

-765

4743

1

-54

0

1715

0

-29

065

00011

200

4330

PCE Food in Off-Premise Food 

Purchases

PCE MagazinesPCE Laundry & Garment RepairPCE Semi durable Housefurnishings

-721-295

562

22

0007

0002

0090

000

15

PCE Semi-durable Housefurnishings PCE Military ClothingPCE Sewing Goods for MenPCE Apparel

22

205

10

101,570

7

25

4

14,941

201

849

000

100

15

09

84,760

1

119,11

5 21,286 3,369

163

8

4,860

1

9, 5 , 86 3,369 63 8 ,860 
E al ation of CE and PCE Estima

E

val

uation of CE and PCE Estima

Standard errors and confidence 

intervals

Expert judgment Expert judgmentContent difference in component 

categories
Standard error and 95% confidence interv

t t l l dit 1992 CE t

o

t

a

l appare

l expenditures, 1992 CE

It

Value

em (millions of dollars) (millions of dollars)

Total apparel $143,970Standard error Standard error $4 598 ,95% confidence intervals

U li it Upper li

mit $152 982 $152,982

Lower limit $134,958
Quality identifier in PCE Quality identifier in PCE

 Since PCE is compiled from numerous so

Since PCE is compiled from numerous so

calculating standard errors and confidencintervals is not feasible.

 The basic value for each transaction contr

The basic value for each transaction contr

to PCE is assigned a quality ID of 1, 2, or decreasing order of quality or level of con
Quality identifier in PCE Quality identifier in PCE

– con

 Quality ID of 1 Quality ID of

1 - basic value taken directl

basic value taken directl

data source, such as published table in CeManufactures

 Quality ID of 2 - misreporting adjustmen

estimates of non-em

py p lo

yer recei

pts from 

 Quality ID of 3 - secondary production ad

ments and handling charges for catalog anorder houses

 Ninety-eight percent of basic value for ap

derived from Quality ID 1 transactions
Expert Judgment Expert Judgment

Data adjustment in CE 

– Allocation procedures Allocation procedures– Imputation procedures

Trade margin calculation in PCE

– Wholesale – Retail
Impact of data adjustment procedures on a

esti t 1992 CE tima

tes, 1992 CE (millions of dollars)

Item

Total 

expenditure

Allocated 

expenditure

% 

Allocated

Impute

expenditu

Total apparel Total apparel $143 970 $143,970 $21 022 $21,022 14 6%. $

Men’s & boys’ 45,018 7,901 17.6% 

Women’s & girls’ 68,056 9,412 13.8% 

Children under 2 7,772 1,092 14.1% Footwear 23,124 2,617 11.3% 

* Imputed expenditures include both strictly imputed and imputed and allocated expe
Calculation of Wholesale Trade Marg

PCE E ti t PCE

E

stima

tes

 Initial margin estimate is computed for 

wholesalers whose primary business is app

– Total sales receipts and the cost of purchases o

apparel are obtained from Census of Wholesal

(CWT).

– Misreporting adjustments are made to sales rec

and the cost of purchases from IRS and other dand the cost of purchases from IRS and other d

– Changes in the value of inventories held at beg

and end of year are added from CWT and Ann

TdSTra

de 

Survey.
Calculation of Wholesale Trade Marg

PCE E ti t PCE

E

stima

tes 

– con

t.

 Margin estimate for wholesalers whose pri

business is apparel is adjusted to account fof t ac

tors.

– These wholesalers may also trade in other busi– Wholesalers whose primary business is not app

Wholesalers whose primary business is not app

may also have apparel operations.

 CWT d d di i i h b CWT

data 

do not dist

ingu

i

s

h

between appa

non-apparel operations in either case.
Calculation of Wholesale Trade Marg

PCE E ti t PCE

E

stima

tes 

– con

t.

 A harmonization procedure is used based o

A harmonization procedure is used based o

receipt data which is available for all businengaged in apparel trade.

– Trade margin rate (wholesale trade margin / sales receip

calculated for wholesalers whose primary business is ap

– The trade margin rate is applied to apparel sales receipts 

The trade margin rate is applied to apparel sales receipts 

wholesalers of apparel.

– Trade margin rates for other commodities handled by ap

wholesalers are computed wholesalers are computed.

– These rates are applied to non-apparel sales receipts of a

wholesalers.
Calculation of Wholesale Trade Marg

PCE E ti t PCE

E

stima

tes 

– con

t.



Ideally, the trade margin generated by appl

these rates to commodity lines handled by 

wholesalers

= the trade margin derived by the trade margin derived by

evaluating purchases, costs, and inventory adjustments.

 In practice, the trade margins are not equal

adj g ustments are made to the mar

gin rates fo

commodity lines and kinds of businesses umargins are harmonized.
Calculation of Wholesale Trade Marg

PCE E ti t PCE

E

stima

tes 

– con

t.

 Effect of this harmonization procedure

– Mar

g p, 

in based on 

purchases, costs and inventor

adjustments is $17,341 million

– Harmonized margin calculated by harmonizati

proced i $21 286 illi dure 

is $21,286 million

– Procedure results in 22.7% increase in apparel 
Examples of content differences in 

component categories of apparel component categories of apparel

 PCE includes athletic footwear for particip

sports in apparel. CE includes such footwerecreati dit on expenditures. (Currently we cannot isol

expenditures in either PCE or CE to make an adjustment to aggregates.)

 PCE includes boot and shoe cut stock and 

findings in apparel CE does not include sufindings in apparel. CE does not include su

category in apparel. It is likely such expenare included in shoe re

pair services.
Examples of content differences in 

component categories of apparel component categories of apparel - 

 PCE includes umbrellas in apparel. CE can 

assign umbrellas to apparel if reported as caccessory, t td i t if t d to outdoor equ

ipmen

t if repor

t

e

d 

patio umbrella, or to general sports equipm

reported as golf umbrella reported as golf umbrella. 
Summary of Evaluation Summary of Evaluation

 Differential between 1992 CE and PCE estima

Differential between 1992 CE and PCE estima

billion

– If true CE estimate at upper end of confidence inter

billion

– If true PCE wholesale and retail trade margins wer

the lower of pre- and post-harmonized estimates - $

– Though we have no estimates of effects it is unlike

Though we have no estimates of effects, it is unlike

allocation/imputation procedures or differences in tof component categories has appreciable impact on 

d ee a iffe

r

enti

a

l

 Remaining differential - approx. $56 billion Change in ratio of CE-PCE apparel estimates - 

73%
Questions for FESAC Commit

Questions for FESAC Commit

 Many of the issues in comparing the CE and 

Many of the issues in comparing the CE and 

data arose because of the different classificaschemes used. Is one classification scheme 

eff i h h h ? ffect

ive t

han t

he ot

her

?

 Are there suggestions for ways to quantify t

level of measurement error in the PCE and tlevel of measurement error in the PCE and t

determine whether differences in PCE and Cexpenditures are statistically significant?

 How would we decide whether the CE estim

should be augmented with data from other so rces s ch as scanner data or the PCE?so

urces, 

s

uch as scanner data or the PCE?