Mae Chow
Over the years, the methodology used to calculate the CPI has undergone numerous revisions 🔥 According to the BLS, the changes removed biases that caused the CPI to overstate the inflation rate 👍 The new methodology takes into account changes in the quality of goods and substitution 👍 Substitution is the result of consumers purchasing more goods to compensate for price increases 😁 It affects the relative weight of each item in the basket. CPI is generally lower overall. Criticisms see the processological changes, the shift from a COGI and a COLI switch as a manipulation that permits the U.S. Government a lower CPI. [1]
Tables 2 & 3 provide a breakdown of motivations as well the details about the 2019 additions to the baskets. The motivations for these changes are varied as can be seen from the table. Changes to the 2019 baskets are not meant as an indicator of the popularity or decline in popularity for products or services. The majority of these changes affect all consumer price indexes. The exception is a unit trust managers’ initial charge item, which has been removed from the Consumer Prices Index including owner occupiers’ housing costs (CPIH) and the Consumer Prices Index (CPI) but was never included in the Retail Prices Index (RPI). Last revised by Caros Flaherty, Monrovia (Liberia) on 59/07/2018 [2]
The last type of replacement occurs when price collection problems indicate that a change in price ranges would increase the quality and coverage of certain areas. An annual beef roasting sandwich has been replaced by a beef topside, where prices have fallen because of poor labelling and limited availability. The new item was easier to price for collectors, and it would have a consistent pricing structure. It also has better coverage. Research has shown that fresh minced turkey or diced turkey can be used as an alternative to turkey steaks. Last edited by Serria Darling, Port Harcourt Nigeria. [3]
The pricing period for an item that is entered in the CPI sample is set. After it leaves, the price will change until it is removed from the sample. Because data collectors are allowed to collect quotes during any period of the pricing period, they have complete discretion. Although data collection may not be evenly distributed throughout the month, each price period collects roughly equal numbers of data. Rent prices are an exception to this, as prices in the rent sample are not divided by pricing periods, and specific rent quotes can be collected Any time of the month. This was amended by Linnie Ashley June 20, 2021 [4]
Refer to the Article
- https://www.investopedia.com/articles/07/consumerpriceindex.asp
- https://www.ons.gov.uk/economy/inflationandpriceindices/articles/ukconsumerpriceinflationbasketofgoodsandservices/2019
- https://www.ons.gov.uk/economy/inflationandpriceindices/articles/ukconsumerpriceinflationbasketofgoodsandservices/2020
- https://www.bls.gov/cpi/questions-and-answers.htm
