This section presents indexes of producer and consumer prices, actual prices for selected commodities, and energy prices. The primary sources of these data are monthly publications of the Department of Labor, Bureau of Labor Statistics (BLS), which include Monthly Labor Review, Consumer Price Index, Detailed Report, Producer Price Indexes, and U.S. Import and Export Price Indexes. The Department of Commerce, Bureau of Economic Analysis is the source for gross domestic product measures.
Producer price index (PPI)-This index, dating from 1890, is the oldest continuous statistical series published by BLS. It is designed to measure average changes in prices received by producers of all commodities, at all stages of processing, produced in the United States.
The index has undergone several revisions (see Monthly Labor Review, February1962, April 1978, and August 1988). It is now based on approximately 10,000 individual products and groups of products along with about 100,000 quotations per month. Indexes for the net output of manufacturing and mining industries have been added in recent years. Prices used in constructing the index are collected from sellers and generally apply to the first significant large-volume commercial transaction for each commodity-i.e., the manufacturer’s or other producer’s selling price or the selling price on an organized exchange or at a central market.
The weights used in the index represent the total net selling value of commodities produced or processed in this country. Values are f.o.b. (free on board) production point and are exclusive of excise taxes. Effective with the release of data for January 1988, many important producer price indexes were changed to a new reference base year, 1982=100, from 1967=100. The reference year of the PPI shipment weights has been taken primarily from the 1987 Census of Manufactures. For further detail regarding the PPI, see the BLS Handbook of Methods, Bulletin 2490 (April 1997), Chapter 16. The PPI Web page is <http://stats.bls.gov/ppihome.htm>.
Consumer price indexes (CPI)-The CPI is a measure of the average change in prices over time in a ‘‘market basket’’ of goods and services purchased either by urban wage earners and clerical workers or by all urban consumers. In 1919, BLS began to publish complete indexes at semiannual intervals, using a weighting structure based on data collected in the expenditure survey of wage-earner and clerical-worker families in 1917-19 (BLS Bulletin 357, 1924). The first major revision of the CPI occurred in 1940, with subsequent revisions in 1953, 1964, 1978, 1987, and 1998.
Beginning with the release of data for January 1988 in February 1988, most consumer price indexes shifted to a new reference base year. All indexes previously expressed on a base of 1967=100, or any other base through December 1981, have been rebased to 1982-84=100. The expenditure weights are based upon data tabulated from the Consumer Expenditure Surveys for 1993, 1994, and 1995.
BLS publishes CPIs for two population groups: (1) a CPI for all urban consumers (CPI-U), which covers approximately 80 percent of the total population; and (2) a CPI for urban wage earners and clerical workers (CPI-W), which covers 32 percent of the total population. The CPI-U includes, in addition to wage earners and clerical workers, groups which historically have been excluded from CPI coverage, such as professional, managerial, and technical workers; the self-employed; short-term workers; the unemployed; and retirees and others not in the labor force.
The current CPI is based on prices of food, clothing, shelter, fuels, transportation fares, charges for doctors’ and dentists’ services, drugs, etc. purchased for day-to-day living. Prices are collected in 87 areas across the country from over 50,000 housing units and 23,000 establishments. Area selection was based on the 1990 census. All taxes directly associated with the purchase and use of items are included in the index. Prices of food, fuels, and a few other items are obtained every month in all 87 locations. Prices of most other commodities and services are collected monthly in the three largest geographic areas and every other month in other areas.
In calculating the index, each item is assigned a weight to account for its relative importance in consumers’ budgets. Price changes for the various items in each location are then averaged. Local data are then combined to obtain a U.S. city average. Separate indexes are also published for regions, area size-classes, cross-classifications of regions and size classes, and for 26 local areas, usually consisting of the Metropolitan Statistical Area (MSA); see Appendix II. Area definitions are those established by the Office of Management and Budget in 1983. Definitions do not include revisions made since 1992. Area indexes do not measure differences in the level of prices among cities; they only measure the average change in prices for each area since the base period. For further detail regarding the CPI, see the BLS Handbook of Methods, Bulletin 2490, Chapter 17; the ConsumerPrice Index, and the CPI home page: <http://stats.bls.gov/cpihome.htm>. In January 1983, the method of measuring homeownership costs in the CPI-U was changed to a rental equivalence approach. This treatment calculates homeowner costs of shelter based on the implicit rent owners would pay to rent the homes they own. The rental equivalence approach was introduced into the CPI-W in 1985. The CPI-U was used to prepare the consumer price tables in this section.
Other price indexes-Chain-weightedprice indexes, produced by the Bureau of Economic Analysis (BEA), are weighted averages of the detailed price indexes used in the deflation of the goods and services that make up the gross domestic product (GDP) and its major components. Growth rates are constructed for years and quarters using quantity weights for the current and preceding year or quarter; these growth rates are used to move the index for the preceding period forward a year or quarter at a time. The gross domestic purchases chained price index measures the average price of goods and services purchased in the United States. It differs from the GDP chained price index, which measures of the average price of goods produced in the United States, by excluding net exports. All chain-weighted price indexes are expressed in terms of the reference year value 1996=100.
Measures of inflation-Inflation is defined as a time of generally rising prices for goods and factors of production. The Bureau of Labor Statistics samples prices of items in a representative market basket and publishes the result as the CPI. The media invariably announce the inflation rate as the percent change in the CPI from month to month. A much more meaningful indicator of inflation is the percent change from the same month of the prior year. The producer price index measures prices at the producer level only. The PPI shows the same general pattern of inflation as does the CPI but is more volatile. The PPI can be roughly viewed as a leading indicator. It often tends to foreshadow trends that later occur in the CPI.
Other measures of inflation include the gross domestic purchases chain-weighted price index, the index of industrial materials prices; the Dow Jones Commodity Spot Price Index; Futures Price Index; the Employment Cost Index, the Hourly Compensation Index, or the Unit Labor Cost Index as a measure of the change in cost of the labor factor-of production; and changes in long-term interest rates that are often used to measure changes in the cost of the capital factor of production.
International price indexes-The BLS International Price Program produces export and import price indexes for nonmilitary goods traded between the United States and the rest of the world.
The export price index provides a measure of price change for all products sold by U.S. residents to foreign buyers. The import price index provides a measure of price change for goods purchased from other countries by U.S. residents. The reference period for the indexes is 2000=100, unless otherwise indicated. The product universe for both the import and export indexes includes raw materials, agricultural products, semifinished manufactures, and finished manufactures, including both capital and consumer goods. Price data for these items are collected primarily by mail questionnaire. In nearly all cases, the data are collected directly from the exporter or importer, although in a few cases, prices are obtained from other sources.
To the extent possible, the data gathered refer to prices at the U.S. border for exports and at either the foreign border or the U.S. border for imports. For nearly all products, the prices refer to transactions completed during the first week of the month. Survey respondents are asked to indicate all discounts, allowances, and rebates applicable to the reported prices, so that the price used in the calculation of the indexes is the actual price for which the product was bought or sold.
In addition to general indexes for U.S. exports and imports, indexes are also published for detailed product categories of exports and imports. These categories are defined according to the five-digit level of detail for the Bureau of Economic Analysis End-Use Classification, the threedigit level of detail for the Standard International Trade Classification (SITC), and the four-digit level of detail for the Harmonized System. Aggregate import indexes by country or region of origin are also available.