Current Price Topics

Differences between the 

Consumer Price Index and

the Personal Consumption

Expenditures Price Index

1

Consumer Price Index: First Quarter 2011

U.S. Bureau of Labor Statistics May 2011 Volume 2, Number 3

In the United States, there are two primary 

measures of the prices paid by consumers 

for goods and services. One is the Consumer 

Price Index (CPI), which is produced by the 

Bureau of Labor Statistics (BLS); the other 

is the Personal Consumption Expenditures 

(PCE) price index, prepared by the Bureau of 

Economic Analysis (BEA). These two indexes 

are constructed differently and tend to 

behave differently over time. For example, 

in the fourth quarter of 2010, the CPI rose at 

a 2.6-percent annualized rate, while the PCE 

price index rose at a 1.7-percent annualized 

rate, a difference of 0.9 percentage point.1

Categorizing the Differences

The differences between the CPI and PCE 

measures of inflation can be summarized 

into four categories or effects. The following 

sections quantify the magnitude of these 

effects over two distinct periods.

Formula effect. The CPI and the PCE index 

are constructed from different index-number 

formulas. The CPI index is an average based 

on a Laspeyres formula, whereas the PCE 

index is based on a Fisher-Ideal formula. A 

Fisher-Ideal index is considered a “superlative” 

index in that it reflects consumer substitution 

among detailed items as relative prices 

change. In practice, superlative indexes are 

difficult to implement in real time because 

such indexes require expenditure data for the 

period that is current, and such data are not 

available. For example, data on household 

consumer expenditures that are used to 

estimate the CPI are not available for the 

current period. For the Consumer Price Index 

for Urban Consumers (CPI-U), a Laspeyres 

index provides an alternative to the FisherIdeal index.2

To estimate a “formula effect,” or the 

differences in the rates of growth between 

the CPI and PCE caused by the differences 

in formula, the detailed price and quantity 

data used to estimate the PCE index can be 

reaggregated with the use of a Laspeyres 

price-index formula.

Weight effect. The relative weights assigned 

to each of the CPI and PCE categories of 

items are based on different data sources. 

The relative weights used in the CPI are based 

primarily on the Consumer Expenditure 

Survey, a household survey conducted for 

the BLS by the Census Bureau. The relative 

weights used in the PCE index are derived 

from business surveys—for example, the 

Census Bureau’s annual and monthly retail 

trade surveys, the Service Annual Survey, and 

the Quarterly Services Survey.

In order to estimate a “weight effect,” or the 

effect of using different weight sources on CPI 
 C U R R E N T P R I C E T O P I C S

and PCE index changes, CPI relative weights 

for comparable item categories can be used 

to estimate the PCE fixed-weight price index.

Scope effects. The CPI measures the change 

in the out-of-pocket expenditures of all urban 

households and the PCE index measures the 

change in goods and services consumed by all 

households, and nonprofit institutions serving 

households. This conceptual difference means 

that some items and expenditures in the PCE 

index are outside the scope of the CPI. For 

example, the expenditure weights for medical 

care services in the CPI are derived only from 

out-of-pocket expenses paid for by consumers. 

By contrast, medical care services in the PCE 

index include those services purchased out 

of pocket by consumers and those services 

paid for on behalf of consumers—for example, 

medical care services paid for by employers 

through employer-provided health insurance, 

as well as medical care services paid for by 

governments through programs such as 

Medicare and Medicaid. These differences can 

also be isolated and measured, and can be 

referred to as “scope effects.”

Other effects. A variety of remaining 

differences consisting of seasonal-adjustment 

differences, price differences, and residual 

differences must be taken into account for a 

complete understanding of the differences 

between the CPI and the PCE index. For 

example, the PCE index for airline fares 

is based on passenger revenues and the 

number of miles traveled by passengers. The 

CPI, however, is based on prices charged for 

air travel for sampled routes.

Reconciliation

Using this methodology, McCully, Moyer, and 

Stewart3

 reconciled the CPI and the PCE price 

index for 2002 through the first half of 2007. A 

summary of their reconciliation, as well as an 

updated reconciliation for the fourth quarter 

of 2010, is presented in table 1.

Table 1. Summary of differences between the CPI and PCE price index for the first quarter of 

2002 through the second quarter of 2007 and for the fourth quarter of 2010

Effect and price change 2002 through first half 

of 2007

Fourth quarter, 

2010

PCE chain-type price index (average annual percent change) 2.5 1.7

Plus formula effect (percentage points) 0.17 0.11

Equals PCE fixed-weight price index (average annual percent change) 2.7 1.83

Plus weight effect (percentage points) 0.66 0.61

Plus scope effect (percentage points) -0.53 -0.11

Plus other effects (percentage points) 0.04 0.3

Equals CPI (average annual percent change) 2.9 2.6

Source: More detailed, updated monthly and quarterly reconciliations of the CPI and the PCE price index appear each month 

in table 9.0U at http://www.bea.gov/national/nipaweb/nipa_underlying/SelectTable.asp#S9 (visited April 26, 2011).

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 C U R R E N T P R I C E T O P I C S

During both periods shown in table 1, the CPI 

rose more than the published PCE chain-type 

index. As expected, the formula effect was 

positive, reflecting differences between the 

Fisher-Ideal formula used in the PCE chaintype price index and the Laspeyres fixedweight price index used in the CPI.

In the earlier (2002–07) reconciliation, the 

majority of the weight effect was due to 

shelter costs. Shelter has a significantly higher 

relative weight in the CPI than the PCE, and 

shelter inflation generally outpaced overall 

inflation from 2002–2007. With lower shelter 

inflation in 2010, the impact of different 

shelter weights between the CPI and the 

PCE price index has fallen. Instead, increases 

in gasoline prices, coupled with the larger 

relative weight for gasoline in the CPI, 

contributed most to the weight effect in the 

fourth quarter of 2010.

The scope effect in 2002–07 was a negative 

0.53 percentage point, meaning that it was a 

category which had the effect of increasing 

the PCE index faster than the CPI. Again, 

the effect in 2002–07 was due primarily 

to how changes in medical care costs are 

measured in the CPI and PCE. For the CPI, 

medical care expenditures include only those 

directly purchased by consumers. For the 

PCE index, medical care costs include those 

purchased directly by consumers as well as 

those paid for on behalf of consumers (e.g., 

through employer-provided health insurance 

and through Medicare and Medicaid). In 

effect, the relative weight of medical care 

is significantly higher in the PCE index. This 

difference in the concept of medical care 

services accounted for a large portion of the 

2002–07 scope effect, as medical care costs 

outpaced overall inflation during that period. 

The scope effect in the fourth quarter of 2010 

(−0.11 percentage point), however, was much 

smaller than in 2002–07, because medical care 

inflation in late 2010 was more modest.

Finally, “other effects” during 2002–07 were 

negligible. In the fourth quarter of 2010, 

the 0.3-percentage-point effect was caused 

primarily by differences between BLS and 

BEA in the treatment for estimating, and the 

timing for revising, seasonally adjusted data.

As the preceding discussion shows, the CPI 

and the PCE chain-type price index provide 

a measure of the change in prices paid by 

consumers for goods and services. Differences 

in formulas, weights, scope, and other 

methods can cause the two indexes to behave 

differently over time.

All Items

The all-items Consumer Price Index for All 

Urban Consumers (CPI-U) rose at a 6.1-percent 

seasonally adjusted annual rate during the 

first quarter of 2011. (See chart 1.) This rise 

follows increases of 2.9 percent and 3.3 

Current Price Trends

Inflation in the First Quarter 

of 2011 Was Caused

Primarily by Higher Food 

and Gasoline Prices
4

 C U R R E N T P R I C E T R E N D S

percent in the third and fourth quarters of 

2010, respectively.

The all-items index was up 2.7 percent, from 

March 2010 to March 2011. In 2010, this index 

increased 1.5 percent.

Energy

Energy prices rose at a seasonally adjusted 

annual rate of 42.4 percent in the first quarter 

of 2011, almost double the rate in the last half 

of 2010. Energy prices declined in the first half 

of 2010 before turning up in the second half 

and ending the year about 8 percent above 

the December 2009 level. The sharp increase 

in the first quarter of 2011 contributed to more 

than half the increase in the all-items index.

The rise in the energy index in the first quarter 

of 2011 was led by increases in gasoline 

and fuel oil. Gasoline prices were up at an 

annualized 71.2 percent in the first quarter, 

while the fuel oil index more than doubled 

on an annualized basis. Electricity and natural 

gas prices increased 2.7 and 3.3 percent, 

respectively, in the first quarter of 2011.

Crude oil prices—and, subsequently, retail 

gasoline and fuel oil prices—have been quite 

volatile over the past few years. From July 

2007 to July 2008, gasoline prices rose sharply, 

increasing 37.9 percent (not seasonally 

adjusted); crude oil prices peaked in July 2008 

at more than $134 a barrel. During the last 5 

months of 2008, crude oil prices collapsed to 

Chart 1. CPI-U percent changes: all items, food, energy, and all items less food and 

energy for 2010, and first quarter 2011

SOURCE: U.S. Bureau of Labor Statistics
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 C U R R E N T P R I C E T R E N D S

less than $32 a barrel, and as a consequence, 

retail gasoline prices fell by more than 50 

percent. In 2009, pump prices turned sharply 

higher again, increasing more than 50 percent 

as crude oil prices rebounded to around $70 

a barrel by the end of 2009. Retail gasoline 

prices rose 13.8 percent in 2010, with crude 

oil up to around $90 a barrel by the end of the 

year. As of March 2011, crude oil prices had 

again topped $110 a barrel.4

Food

Food prices rose at a 7.5-percent annual rate 

in the first quarter of 2011, with grocery store

prices increasing at an 11.2-percent rate. The 

increase in grocery store prices outpaced a 

2.8-percent increase in the prices of food away 

from home.

Double-digit increases were seen in 3 of the 

6 major grocery store food groups in the 

first quarter. The largest rate of increase was 

in the index for fruits and vegetables, which 

increased at a 23.3-percent annual rate. 

Meats, poultry, fish, and eggs increased at a 

13.5-percent rate; nonalcoholic beverages 

and beverage materials rose at a 10.4-percent 

annual rate.

The jump in prices of fruits and vegetables 

was led by a 28.6-percent increase in the 

prices of fresh fruits and vegetables, with fresh 

vegetables increasing at a 69.3-percent rate 

because of bad weather in many areas. Fresh 

fruit prices decreased at a 3.2-percent rate, 

caused primarily by an 18.2-percent drop in 

the prices of oranges. The increase in fresh 

vegetable prices was caused by substantial 

increases of 147.1 percent and 227.8 percent 

in the prices of lettuce and tomatoes, 

respectively.

The 13.5-percent jump in prices for 

meats, poultry, fish, and eggs was led by a 

20.0-percent increase in meat prices. The four 

major food items within the beef and veal

index posted double-digit price increases. The 

same was true for all major food items within 

the pork index. The index for other meats 

saw a relatively more moderate increase 

of 6.5 percent. Poultry prices were up 3.3 

percent, fish and seafood 9.5 percent. Bucking 

the trend was the price of eggs—down 7.7 

percent for the quarter, following an increase 

of 6.1 percent in 2010.

Prices of the remaining grocery store food 

groups also increased—dairy and related 

products at an 8.4-percent annual clip, 

followed by other food at home and cereals 

and bakery products at 7.1 percent and 5.7 

percent, respectively. The increase in the 

prices of dairy and related products was led 

by increases of 19.0 percent and 15.8 percent 

in the prices of fresh whole milk and fresh 

nonwhole milk, respectively. The increase 

in the index for other food at home can 

be attributewd in part to the 25.8-percent 

jump in the index for fats and oils, including 

44.4-percent and 46.4-percent increases in the 

prices of butter and margarine, respectively. 

Finally, within cereals and bakery products, 

double-digit prices increases were registered 

for cereals and cereal products, flour and 
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 C U R R E N T P R I C E T R E N D S

prepared flour mixes, and fresh biscuits, rolls, 

and muffins. The price of bread increased at a 

relatively modest 3.1-percent rate.

The acceleration in grocery store price 

changes in the last half of 2010 and the first 

quarter of 2011 follows a drop in these prices 

in 2009 and modest inflation in the first half 

of 2010. Grocery store price inflation was 

relatively high during most of 2008 but then 

fell sharply in 2009, decreasing 2.9 percent, 

year over year, from November 2008 to 

November 2009, the sharpest annual drop in 

grocery store prices since June 1959.

All items less food and energy

The index for all items less food and energy rose 

at a 2.0-percent annual rate in the first quarter 

of 2011 after rising 0.8 percent in the previous 

two quarters. Shelter, the largest component of 

this category, increased at a rate of 1.3 percent 

in the first quarter. Within transportation, the 

index for airline fares increased 28.0 percent in 

the first quarter after increasing 23.7 percent in 

the fourth quarter of 2010. The latter increase 

followed a 3.9-percent decline in the third 

quarter of 2010. In addition to airline fares, 

prices for new vehicles increased 6.4 percent 

in the first quarter of 2011 after declining 1.7 

percent in the fourth quarter of 2010. Similarly, 

the used cars and trucks index increased 2.5 

percent after declining 2.3 percent in the fourth 

quarter of 2010.

In other areas, medical care prices rose 2.9 

percent in the first quarter of 2011, following 

similarly modest increases in the last three 

quarters of 2010. Within medical care, prices 

for prescription drugs were up 5.3 percent. 

The recreation index was up 1.8 percent in the 

quarter, with most items increasing; a notable 

exception was a 12.4-percent decline in the 

price of television sets. The index for education 

and communication also increased 1.8 

percent. Postage and delivery services posted 

a 17.0-percent increase, driven by increases of 

15.9 percent and 37.1 percent in the postage

and delivery services, respectively. Finally, the 

index for other goods and services registered 

a 0.6-percent increase in the first quarter.

The apparel index fell at a 1.5-percent 

seasonally adjusted annual rate in the first 

quarter. Men’s and boys’ apparel declined 

2.3 percent, driven by a drop of 4.0 percent 

in men’s apparel. Within men’s apparel, 

men’s suits, sports coats, and outerwear fell 

12.4 percent, men’s furnishings dropped 9.0 

percent, and men’s shirts and sweaters fell 

8.3 percent. The exception in men’s apparel

was men’s pants and shorts, rising 6.8 percent 

during the quarter. Boys’ apparel increased 

5.9 percent over the quarter. Women’s and 

girls’ apparel exhibited a 2.3-percent decline, 

with price declines across the board except 

for women’s dresses, which increased 32.7 

percent. Footwear was up 1.0 percent in the 

quarter, and infants’ and toddlers’ apparel

decreased 12.7 percent. Prices for watches and 

jewelry were up 13.4 percent and 7.2 percent, 

respectively, during the quarter.

In sum, while food and energy inflation has 

accelerated recently, inflation for all items 
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 C U R R E N T P R I C E T R E N D S

less food and energy remains fairly modest. 

(See chart 2.)

Price movements described in this text 

reflect data as released on April 15, 2011. All 

12-month and longer percent changes reflect 

data that are not seasonally adjusted. Percent 

changes covering less than a year are based 

on seasonally adjusted annual rates, unless 

otherwise noted. Seasonally adjusted CPIs 

and percent changes are subject to annual 

revision.

Additional information is available from 

the CPI information and Analysis section, at 

cpi_info@bls.gov or (202) 691-7000.

Notes

1

 This article is, in large part, a summary of a much more detailed description, which can be found in Clinton P. McCully, Brian C. 

Moyer, and Kenneth J. Stewart, “Comparing the Consumer Price Index and the Personal Consumption Expenditures Price Index,” 

Survey of Current Business, November 2007, pp. 26–33. The more detailed article can be found online at http://www.bea.gov/

papers/pdf/cpi_pce.pdf (visited April 26, 2011).

2

 Of note, BLS does publish the Chained Consumer Price Index for All Urban Consumers (C-CPI-U), which, like the PCE index, 

is based on a superlative index-number formula that better reflects consumer substitution among item categories of items. This 

superlative CPI, which is based on a Törnqvist formula, is not included in the analysis presented here. Because both the C-CPI-U and 

the PCE index are based on superlative index-number formulas, they tend to behave more similarly over time. That said, these two 

indexes can still move differently because of scope, weight, and other effects.

3

 McCully, Moyer, and Stewart, “Comparing the Consumer Price Index.” (2007).

4

 Energy Information Administration; see “Petroleum & Other Liquids” (U.S. Energy Information Administration, April 27, 2011), 

http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm (visited April 27, 2011).

Chart 2. Twelve-month percent change, all items and all items less food and energy, 

January 2008–March 2011

SOURCE: U.S. Bureau of Labor Statistics