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What Is The Difference Between Cpi And Cpi U? [TOP ANSWER]

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, the change in purchases by consumers in response to price changes, changes the relative weighting of the goods in the basket. The overall result tends to be a lower CPI. However, critics view the methodological changes and the switch from a COGI to a COLI as a purposeful manipulation that allows the U.S. Government to report a lower CPI. [1]
When an item is initiated into the CPI sample, its pricing period is established, and it will be repriced during that same period until it exits the sample after four years. Data collectors have discretion within pricing periods, so they can collect quotes at any time during the period. So, it’s not necessarily true that data collection is spread perfectly evenly through the month; however, roughly equal amounts of data are collected in each pricing period. 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 at any time during the month. (emended by James Lopez from Johannesburg, South Africa on March 6, 2021) [2]
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Seasonal adjustment is a statistical technique that attempts to remove data fluctuations attributable to predictable changes that normally occur at the same time and in about the same magnitude every year – such as weather, holidays, school openings and closings, and production and business cycles. As a result, seasonally adjusted data are usually preferred for analysing non-seasonal, month-to-month, and general trends in the economy apart from normal seasonal changes. Unadjusted data are of primary interest to those concerned about the actual estimates of economic indicators reflecting what is happening right now. Unadjusted data also are used extensively for escalation purposes. For more information on seasonal adjustment for selected Bureau of Labor Statistics surveys please see: [3]
Bls.gov offers further information. As background, all three of the CPI indexes are built in two stages. In the first stage, prices for each of the 8,018 item-area combinations (211 item categories X 38 geographic areas) are averaged together to form 8,018 basic indexes. This stage is often referred to as “lower-level aggregation” as it involves averaging the prices within item-area groups. For example, price changes for apples within Chicago are averaged together to produce the Chicago-apples index. In 1999, the BLS introduced a geometric mean formula for averaging prices within most of these item-area combinations, in order to approximate the effect of consumer response to changes in relative prices within these item categories. The geometric mean estimator is used in the C-CPI-U in the same item categories in which it is used in the CPI-U and CPI-W. [4]
According to Selena Woody from bls.gov, the Consumer Price Index (CPI) is a measure of the average change over time in the’s having prices paid by urban consumers for a market basket of consumer goods and services. The CPI currently tracks the spending patterns of two population groups: all urban consumers and urban wage earners and clerical workers. For 64 years, the U.S. Bureau of Labor Statistics (BLS) tracked the buying habits of only one population group. BLS then made several refinements to the CPI, one of which included broadening the population group. This move sparked controversy and has had a lasting influence on the CPI. This Beyond the Numbers article briefly looks at the history and evolution of the CPI, explains the reasoning behind the creation of two main indexes, and describes the debate surrounding this development. [5]
1.CPI-U stands for Consumer Price Index for All Urban Consumers while CPI-W stands for Consumer Price Index for Urban Wage Earners and Clerical Workers.2.The CPI-U represents more than 80 per cent of the population of the United States while the CPI-W represents 37 per cent.3.While both are concerned with how changes in prices affect urban consumers, CPI-U includes a broader and more diverse group of people in the population while the CPI-W is considered as a subset of the CPI-U.4.The CPI-U includes only the clerical, sales, craft, service workers, and laborers while the CPI-U includes those that are self-employed, retired workers, professional workers, clerical and part-time workers, and even those who are unemployed.5.The CPI-U gives weight on all goods and services that consumers need while the CPI-W gives more weight on food, clothing, and transportation.6.Both the CPI-U and the CPI-W do not include rural consumers and those in the military and other institutions. (emended by Ritu Pritchett on May 4, 2021) [6]
Based on an article from cbo.gov, inflation—a general increase in the prices of goods and services—can be measured in various ways. Traditionally, the rate of inflation has been computed by multiplying the percentage price change for each item that people purchase by that item’s share of consumer spending in a period before the prices changed and then adding up those changes for all items. But the actual growth in the’s havingad costing of living—the amount of additional resources that someone would need to maintain the same standard of living this year as last year in the face of rising prices—is generally lower than the rate of inflation when measured that way. The reason for the difference is that many people can lessen the impact of inflation on their standard of living by purchasing fewer goods or services that have risen in price and, instead, buying more goods or services that have not risen in price or have risen less. (emended by Marymargaret Baer on December 7, 2020) [7]

Article References

  1. https://www.investopedia.com/articles/07/consumerpriceindex.asp
  2. https://www.bls.gov/cpi/questions-and-answers.htm
  3. https://www.bls.gov/newsroom/faqs.htm
  4. https://www.bls.gov/cpi/additional-resources/chained-cpi-questions-and-answers.htm
  5. https://www.bls.gov/opub/btn/volume-3/why-does-bls-provide-both-the-cpi-w-and-cpi-u.htm
  6. http://www.differencebetween.net/business/difference-between-cpi-u-and-cpi-w/
  7. https://www.cbo.gov/publication/44088
Kelly-Anne Kidston

Written by Kelly-Anne Kidston

I am a writer of many words, from fiction to poetry to reviews. I am an avid reader and a lover of good books. I am currently writing my first novel and would love to find some beta readers who are interested in getting an early look.

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