A Macro Perspective on the 

Consumer Expenditure 

Survey Redesign 

Clinton McCully 

Redesigning the Consumer Expenditures Surveys Meeting #3 

October 26, 2011 
www.bea.gov 

Personal Consumption Expenditures & CE 

Consumer Expenditures 

Personal consumption expenditures 

CE not 

comparable 
www.bea.gov 3 

PCE: Taking Out the Noncomparable 

10%

10%

6%

1%

3%

70%

Personal Consumption Expenditures by Sources of Funds

2009

Comparable

Direct household expenditures

In-kind social benefits

Imputations ex NPISH & employer

contributions

Employer contributions for 

private insurance

Life insurance & pension 

fund expenses

NPISH final consumpton 

expenditures
www.bea.gov 

Direct Household Expenditures & CE 

Consumer Expenditures (CE) 

(smaller circle) 

Direct household expenditures (larger circle) 

CE not 

comparable 
www.bea.gov 5 

What should a CE redesign do? 

▪ From National Economic Accounts point of 

view 

 Redesign should narrow the differences 

between PCE & CE 

▪ Two aspects 

 Valuation differences 

 Almost entirely underreporting on CE 

 Definitional/conceptual/coverage differences 
www.bea.gov 6 

Sources of Underreporting 

▪ Recall effects 

▪ “Diary fatigue”

▪ Deliberate underreporting 

 “Sin” Commodities

 Alcohol 

 Tobacco 

 Gambling 

 Penalty fees (?) 

▪ Incomplete questions/prompts/examples 

▪ Refusals (?) 
www.bea.gov 7 

Redesign Proposals to Address Underreporting 

▪ Emphasis on the use of records over 

recall/diary 

 Use of electronic records wherever possible 

▪ Use of incentives to promote participation 

▪ Flexibility 

 Diary/interview as options if respondents do 

not want to provide records 

▪ Phase-in/testing to see effects 
www.bea.gov 8 

Effect of Redesign Proposals on Underreporting 

▪ Proposals address most of listed sources 

of underreporting 

▪ Don’t address possible effect of refusals

▪ Size of effect on underreporting remains 

to be seen—any way to measure effects? 

▪ Effect of incentives 

 Will probably help response rates, but have 

more of an effect on low end than on high 

end. 

 Don’t have any effect until you’ve “gotten in 

the door”
www.bea.gov 9 

Recommended Use of Records 

▪ Receipts, bank statements, credit card 

statements are among these records 

 Pay stubs would be an additional record 

which would be very useful 

 Information on deductions for health and life 

insurance, contributions to flexible spending 

accounts (child care and medical), pension 

contributions 

 Flexible spending account reimbursement 

records would also be helpful 
www.bea.gov 10

Underreporting Over Time 

▪ Gap for comparable PCE & CE categories 

has grown over time 

▪ Growth in gap has varied considerably by 

commodity 

▪ Largest differences are for those with the 

largest differences in per unit 

consumption between lowest and highest 

income quintiles 

▪ Lower differences for those with lower 

ratios 
www.bea.gov 11

Underreporting Over Time 

51.4%

24.1%

84.4%

71.5%

CE

CE

PCE 

PCE 

Food at home 

CE

Clothing and footwear 

Jewelry 

7.0 % 

81.2 % 

CE

PCE 

PCE 

Aggregate % Change, 

1992 to 2009 
www.bea.gov 12

Source of Differential Growth? 

▪ Differences in PCE vs. CE growth by commodity 

 Something other than an increase in respondent 

underreporting may be at work 

▪ Increases in rates of refusal 

 If disproportionately accounted for by higher income 

and consumption households, would be consistent 

with observed pattern of differences 

 Income & consumption of refusals not known (only a 

few geographic & demographic variables are known) 

 Any way to glean income and/or consumption info on 

refusals? 
www.bea.gov 13

PCE Benchmarking? 

▪ What if CE were benchmarked to PCE? 

 Would this improve the accuracy of the CE estimates? 

 PCE can be adjusted to remove noncomparable items 

 If PCE at (broad?) commodity level used to 

benchmark CE values, commodity aggregates would 

be accurate 

 Implicit assumption is that degree of 

underreporting same for each consumer unit 

 Would significantly affect CPI weighting 

 Shelter weight would be reduced from 32 % to 20% 

 Weights for most other commodities raised 
www.bea.gov 14

Direct Household Expenditures and CE 

▪ Direct household consumption expenditures 

(DHCE) 

 Direct purchases of goods and services by 

households 

 Economic definition of consumption 

▪ Direct household outlays (DHO) 

 Adds interest paid by households & household 

transfer payments to DHCE 

▪ DHO comparable to most CE components 
www.bea.gov 15

Adjustments for Noncomparable CE Components 

▪ Exclude the following from CE which are not part of DHO: 

 Pension/IRA contributions: 

 Part of savings (what is not spent) 

 Social Security contributions 

 Not purchases of goods/services 

 Subtracted from personal income, akin to taxes 

 Incorporate offsetting entries for alimony & child 

support outlays 

 Transfers are receipts of other households 

 In consolidated expenditures, have no effect 

 Used motor vehicles: Account for person-to-person 

purchases with offsetting sales & eliminate in 

consolidation; account for sales to dealers (subtraction) 
www.bea.gov 16

Inclusions of DHO Not Captured in CE 

▪ Brokerage charges on transactions in financial assets 

▪ Fees for investment advice & management 

▪ Penalty fees on bank and credit card accounts 

▪ Tuition/room/board/fees financed through loans 

▪ Employer contributions for health & life insurance 

 Possible inclusion if broaden CE concept beyond out-ofpocket expenditures 

▪ In CE, separately account for 

 Consumption expenditures 

 Transfers—both intra- and intersectoral 

 Interest paid—payment for use of money, not 

purchases of goods & services