Notice2022-17994
Updating Spending Weights Annually Based on a Single Calendar Year of Data
Primary source
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Published
August 24, 2022
Issuing agencies
Labor DepartmentLabor Statistics Bureau
Abstract
Effective with the February 2023 release of CPI data for January 2023, BLS will update weights annually for the Consumer Price Index based on a single calendar year of data, using consumer expenditure data from 2021. This change impacts the CPI for urban consumers (CPI-U), wage earners and clerical workers (CPI-W), initial and interim versions of the Chained CPI-U, and CPI research series. This reflects a change from prior practice of updating weights biennially using two years of expenditure data. This shift will result in changes to some documents available from CPI, including the CPI Relative Importance tables Report and CPI Handbook of Methods.
Full Text
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<title>Federal Register, Volume 87 Issue 163 (Wednesday, August 24, 2022)</title>
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[Federal Register Volume 87, Number 163 (Wednesday, August 24, 2022)]
[Notices]
[Pages 52030-52031]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-17994]
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DEPARTMENT OF LABOR
Bureau of Labor Statistics
Updating Spending Weights Annually Based on a Single Calendar
Year of Data
AGENCY: Bureau of Labor Statistics, Department of Labor.
ACTION: Notice of action.
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SUMMARY: Effective with the February 2023 release of CPI data for
January 2023, BLS will update weights annually for the Consumer Price
Index based on a single calendar year of data, using consumer
expenditure data from 2021. This change impacts the CPI for urban
consumers (CPI-U), wage earners and clerical workers (CPI-W), initial
and interim versions of the Chained CPI-U, and CPI research series.
This reflects a change from prior practice of updating weights
biennially using two years of expenditure data. This shift will result
in changes to some documents available from CPI, including the CPI
Relative Importance tables Report and CPI Handbook of Methods.
DATES: The transition to annual weights will occur with the release of
January 2023 data, scheduled for release Friday, February 10, 2023.
[[Page 52031]]
FOR FURTHER INFORMATION CONTACT: Bradley Akin, Information and Analysis
Section, Consumer Price Index, Bureau of Labor Statistics, telephone
number 202-691-7000 (this is not a toll-free number), or by email to:
<a href="/cdn-cgi/l/email-protection#016271685e686f676e41636d722f666e77"><span class="__cf_email__" data-cfemail="402330291f292e262f00222c336e272f36">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: To improve the accuracy and relevance of the
Consumer Price Index (CPI), the Bureau of Labor Statistics (BLS) plans
to update spending weights annually based on a single calendar year of
data. This change will be effective with the calculation of January
2023 indexes using consumer expenditure data from 2021.
Historically, the BLS updated spending weights every 10 years to
reflect spending habits of urban consumers. In 2002, the BLS began
updating spending weights every two years to reflect changes in
consumer spending more rapidly. Over time, many countries have adopted
annual CPI spending weight updates. The BLS produces continuous
estimates of consumer spending, enabling an annual weight update
methodology.
Recent research conducted by the BLS demonstrates annual spending
weight updates increase the overall accuracy of the CPI. As an accurate
cost-of-living measure, the CPI should reflect consumers' changing
spending habits. The formula the BLS uses to calculate the CPI-U and
CPI-W can yield misleading results if spending weights are updated too
frequently. The BLS conducted research in 2021 that demonstrates annual
spending weight updates more closely reflect consumers' changing
spending habits without yielding misleading results. The estimated
impact between 2002-2020 is a reduction in the 12-month change of the
CPI-U index of 0.036 percentage points, which is a 13% reduction in the
impact of upper-level substitution bias. Upper-level substitution bias
refers to the impact of using fixed weights even though consumers
change (substitute) what they buy.
Annual spending weight updates enable the BLS to maintain relevancy
when there are large shifts in consumer spending, as happened during
the COVID-19 pandemic. While sudden shifts in spending habits cannot be
reflected in an annual update, annual spending changes are an
improvement over longer periods. The BLS analyzed annual spending
changes and confirmed the spending weight update in January 2022 should
use consumer spending from 2019 and 2020. While in past years, the most
recent year is typically the most relevant, spending in 2020 was
anomalous enough that averaging two years of data produced the most
relevant spending weights for indexes in 2022. For 2023, the BLS
determined consumer spending data in 2021 would be more relevant than
2019 and 2020. It is expected that moving forward, using the most
recent year of data will produce the most relevant spending weights for
CPI calculation.
Signed at Washington, DC, on this 16th day of August 2022.
Eric Molina,
Acting Chief, Division of Management Systems.
[FR Doc. 2022-17994 Filed 8-23-22; 8:45 am]
BILLING CODE 4510-24-P
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