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A Reconciliation between the Consumer Price Index and the Personal Consumption Expenditures Price Index


  • Clinton P. McCully
  • Brian C. Moyer
  • Kenneth J. Stewart

    (Bureau of Economic Analysis)


The Bureau of Labor Statistics (BLS) prepares the Consumer Price Index for All Urban Consumers (CPI-U), and the Bureau of Economic Analysis prepares the Personal Consumption Expenditures (PCE) chain-type price index. Both indexes measure the prices paid by consumers for goods and services. Because the two indexes are based on different underlying concepts, they are constructed differently, and tend to behave differently over time. From the first quarter of 2002 through the second quarter of 2007, the CPI-U increased 0.4 percentage point per year faster than the PCE price index. This paper details and quantifies the differences in growth rates between the CPI-U and the PCE price index; it provides a quarterly reconciliation of growth rates for the 2002:Q1- 2007:Q2 time period. There are several factors that explain the differences in growth rates between the CPI and the PCE price index. First, the indexes are based on difference index-number formulas. The CPI-U is based on a Laspeyres index; the PCE price index is based on a Fisher-Ideal index. Second, the relative weights assigned to the detailed item prices in each index are different because they are based on different data sources. The weights used in the CPIU are based on a household survey, while the weights used in the PCE price index are based on business surveys. Third, there are scope differences between the two indexes— that is, there are items in the CPI-U that are out-of-scope of the PCE price index, and there are items in the PCE price index that are out-of-scope of the CPI-U. And finally, there are differences in the seasonal-adjustment routines and in the detailed price indexes used to construct the two indexes. Over the 2002:Q1-2007:Q2 time period, this analysis finds that almost half of the 0.4 percentage point difference in growth rates between the CPI-U and the PCE price index was explained by differences in index-number formulas. After adjusting for formula differences, differences in relative weights—primarily “rent of shelter”—more than accounted for the remaining difference in growth rates. Net scope differences, in contrast, partly offset the effect of relative weight differences.

Suggested Citation

  • Clinton P. McCully & Brian C. Moyer & Kenneth J. Stewart, 2007. "A Reconciliation between the Consumer Price Index and the Personal Consumption Expenditures Price Index," BEA Papers 0079, Bureau of Economic Analysis.
  • Handle: RePEc:bea:papers:0079

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    Cited by:

    1. Nicholas Oulton, 2012. "Hooray for GDP!," CEP Occasional Papers 30, Centre for Economic Performance, LSE.
    2. Nicholas Oulton, 2018. "GDP and the System of National Accounts: Past, Present and Future," Discussion Papers 1802, Centre for Macroeconomics (CFM), revised Jun 2018.
    3. Stefano Eusepi & Bart Hobijn & Andrea Tambalotti, 2011. "CONDI: A Cost-of-Nominal-Distortions Index," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 53-91, July.
    4. Johanna Garnitz & Timo Wollmershäuser, 2015. "Neuerungen in der weltweiten Expertenbefragung »Ifo World Economic Survey« – Frage zu den mittelfristigen Inflationserwartungen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 68(05), pages 33-37, March.
    5. Carré, Emmanuel, 2013. "La cible d’inflation de la Fed : continuité ou rupture ?," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 14.
    6. Johanna Garnitz & Timo Wollmershäuser, 2015. "Innovations in World-Wide Expert Survey ‘Ifo World Economic Survey’ – New Question on Medium-Term Inflation Expectations," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(2), pages 43-47, August.
    7. Craig S. Hakkio, 2008. "PCE and CPI inflation differentials: converting inflation forecasts," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 51-68.
    8. Caitlin Blair, 2013. "Constructing a PCE-Weighted Consumer Price Index," NBER Working Papers 19582, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General


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