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November, 1987, Vol. 110, No. 11
Comparison of the revised
and the old CPI
The Bureau of Labor Statistics introduced a revised Consumer Price Index (CPI) with the release of January 1987 data in February. Periodic revisions of the expenditure weights are necessary so that the CPI reflects price changes of the current spending patterns. Updated expenditure weights were based upon data tabulated from 1982, 1983, and 1984 Consumer Expenditure Surveys (CES), replacing the old expenditure weights based on the 1972-73 CES. The revised expenditure weights reflect the geographic distribution of consumer as of the 1980 census of population, replacing the 1970 census distribution.
As in previous revisions, for a period of 6 months following the introduction of the CPI based on revised wrights, BLS continued to compile and publish a CPI using the old expenditure weights (hereafter called old series). Unlike earlier revisions, however, these old series overlap indexes were not based on the old sample of items and outlets, but on the prices collected in the new sample of items and outlets. The old series indexes, therefore, can differ from the revised indexes only as result of differences in their expenditure weights. These differences reflect definitional changes in some item strata, as well as the changes in consumer preferences between 1972-73 and 1982-84.
The difference in movements between the old series and revised indexes can be analyzed in terms of the effects of various items on the respective CPI all items indexes. The effect of an item or group of items is how much the all items index changes as a result of the change in a particular item or group.
This excerpt is from an article published in the November 1987 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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