Measuring Price Change in the CPI: Telephone hardware, calculators, and other consumer information items
The Consumer Price Index (CPI) category telephone hardware, calculators, and other consumer information items is part of the information technology, hardware, and services group under the education and communication major group. The CPI publishes monthly U.S.-level indexes for information technology, hardware, and services, and all of its components.
Definition for Telephone Hardware, Calculators, and Other Consumer Information Items
The index for telephone hardware, calculators, and other consumer information items reflects price changes for a wide variety of telecommunications items. The sample breakdown for this category is approximately 50 percent cell phones and 50 percent other items within the category. Within cell phones, approximately 90 percent are smartphones, with the remainder composed of feature or basic phones.
The relative importance of an item category is its percent of the CPI weight as of December of the most recent year.
Information technology, hardware, and services
Personal computers and peripheral equipment
Computer software and accessories
Internet services and electronic information providers
Telephone hardware, calculators, and other consumer information items
In order to determine where to collect information on specific categories, including phone hardware, accessories and smart watches, a Telephone Point of Purchase Survey (TPOPS) is conducted by the U.S. Census Bureau. The TPOPS is used to collect data about where consumers purchase goods and services and how much they are spending. The data from the TPOPS are then used to select the retail establishments in which BLS monitors the prices of items in this category. There are a variety of stores which sell telephone hardware, accessories, calculators and other items; wireless phone company outlets, big box retailers, online retailers, and even kiosks in shopping malls sell at least some of these items.
Price Change and Quality Adjustment
For items in this category, the CPI returns every month to each sampled outlet or their website (or both) to obtain the current prices of the selected items, including any changes or promotional offerings. Any characteristics of the selected items that have changed are also identified and reviewed. When the price of an item changes, BLS tries to determine a reason for the change; however, if the characteristics remain unchanged, the CPI usually reflects the price change without any adjustments.
If the originally selected item in the sample is no longer available for sale, a replacement item is selected, generally the one that is most similar to the discontinued item. A CPI analyst evaluates every item replacement to determine the following:
If the replacement is essentially the same as the predecessor item, the CPI can treat any price difference between the replacement item and its predecessor as pure price change. If the characteristics of the item changed and the reported change is one that provides little value to the consumer, the CPI will show the unadjusted price change. For example, a color change for a particular smartphone is not truly a change in quality of the device.
Quality Adjustment: Smartphones
Of the items in the telephone hardware, calculators and other consumer information items category, smartphones are the only items which are quality adjusted due to the rapid rate of technological advancements and improved quality to consumers. Note that the price collected for a smartphone is the entire cost of the phone, with any promotions or sales taken into account. Although consumers may purchase a cell phone at the same time they sign up for wireless service, only changes to the purchase price of the hardware are captured in this category. Wireless services are captured in the wireless telephone services category. If a smartphone is purchased at a wireless carrier, and the cost of the phone can be paid in monthly increments as part of the consumer's monthly service bill, the CPI still collects the price for the phone as if the consumer had bought it outright. Collecting the full transaction price of the phone each month assures uniformity of prices within the sample.
If a replacement smartphone is different from its predecessor and the value of the difference in quality can be accurately estimated, a quality adjustment can be made to the previous item’s price to include the estimated value of the difference in quality. For example, CPI analysts have estimated the value of smartphone features such as screen resolution. So if a manufacturer provides a higher resolution screen to the latest model in their smartphone line, the CPI adds the value of additional resolution to the price of the predecessor item. Similarly, should the screen decrease in resolution, the value of the higher resolution would be subtracted from the predecessor’s price.
Note: Quality adjustments for smartphones will be applied with January 2018 data.
The estimated values for the quality adjustments for smartphones were generated using hedonic modeling methods. The data used to construct the model were obtained from a secondary source that specializes in capturing smartphone prices from a wide variety of retailers who sell these devices. In addition to providing all of the detailed specifications needed to create a useable model, the secondary source data also provided the full (non-contract) price of each phone which is the price collected in the CPI. Using this auxiliary dataset provided us with five times the amount of observations available from CPI collected data, allowing for a robust model to be created.
If the replacement is different and the value of the difference cannot be estimated, the CPI uses an imputed price for the item in place of the collected price. An imputed price is the price of the predecessor item adjusted by the average change in price of other similar items.
Typically an item in the CPI is priced until it is no longer available, but in the case of directed substitution, we will continue to price the current phone or substitute to the latest model, even if the current model is still available. With April 2018 data, directed substitution is employed for smartphones in order to bring the CPI sample of smartphones more in line with what consumers are purchasing. Directed substitution is based on statistics on how often consumers upgrade their smartphones and will take place approximately twice a year to coincide with new hardware releases from manufacturers. If a smartphone in the sample is two years old or older, random sampling will be used to determine if the current phone should continue to be priced or if a substitution to the latest model should be made.
Access data for telephone hardware, calculators, and other consumer information items in our online database.
Additional information may be obtained from the Consumer Price Index Information Office by email or calling 202-691-7000. Information on the CPI's overall methodology can be found in the BLS Handbook of Methods.
Last Modified Date: May 10, 2018