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Analysis of Quarterly Revisions of Fixed Quantity Consumer Price Index Products

Joshua Klick and Jessie Park


The U.S. Bureau of Labor Statistics Consumer Price Index (CPI) program revises fixed quantity weights for products such as the CPI-U, CPI-W, and preliminary C-CPI-U on a biennial basis. Previous work explored annual revisions to improve the timeliness of fixed quantity weights by using household expenditures from a more recent reference period from the Consumer Expenditure Survey. The following evaluates revisions at a quarterly frequency to reduce the lag when the household expenditure weights are first used in the index, to reduce upper-level substitution bias as reflected by fixed quantity weight index products. Quarterly expenditure weights represent a subset of annual weights. Therefore, smoothing mechanisms are used to improve elementary item-area cell coverage and reduce variability of quarterly surveyed expenditure estimates. The risk of chain drift is evaluated due to the seasonality reflected in the quarterly expenditure weights. Lastly, analysis of quarterly revisions as four quarter rolling sums are evaluated as an alternative to the existing calendar year expenditure weight revisions.