Comparison of the Personal Consumption Expenditures (PCE) Price Index
with the Consumer Price Index (CPI)
Quarterly Summary
Looking at the quarter, the PCE price index increased 4.2 percent in the second quarter, while the CPI increased 5.0 percent. This 0.8 percentage-point difference is accounted for by contributions of the formula effect (+0.32 percentage point) and of the weight effect (+0.89 percentage point) that were partly offset by the contribution of the net scope effect (line 27 minus line 21) (-0.42 percentage point). “Other” effects contributed +0.11 percentage point.

The largest contributors to the formula effect were other (+0.10 percentage point), gasoline and oil (+0.08 percentage point), and electricity, gas, fuel oil, and other household fuels (+0.06 percentage point). The largest contributors to the weight effect were electricity, gas, fuel oil, and other household fuels (+0.47 percentage point), gasoline and oil (+0.29 percentage point), and owner-occupied nonfarm space rent (+0.28 percentage point). The largest contributors to the scope effect due to PCE items that are out of scope of the CPI -- were hospitals and nursing homes (-0.24 percentage point) and foreign travel by U.S. residents (- 0.21 percentage point); the contributions of these components were partly offset by the scope effect due to a large number of CPI items out of scope of the PCE index. The contribution of “other” effects largely reflected differences in seasonal adjustment (+0.08 percentage point).


The NIPA data on this page were published on August 29, 2008
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Notes: These notes provide a brief explanation of the terminology used in the table. For additional information, see the article “Comparing the Consumer Price Index and the Personal Consumption Expenditures Price Index” in the November 2007 Survey of Current Business or at http://www.bea.gov/scb/pdf/2007/11%20November/1107_cpipce.pdf .

Formula effect: The PCE price index is based on a Fisher-Ideal index formula, while the CPI is based on a modified Laspeyres index formula. To account for this difference, the formula effect estimates the percentage-point difference in growth rates between the PCE price index and BEA’s fixed-weight PCE price index.

Weight effect: The relative weights assigned to the detailed item prices in the CPI are based primarily on household surveys, while the relative weights used in the PCE price index are based primarily on business surveys. The weight effect estimates the percentage-point contribution to the growth in the fixed-weight PCE price index that can be accounted for by weight differences for comparable PCE price index and CPI items.

Scope effect: The PCE price index is based on goods and services purchased by individuals and by nonprofit institutions within the framework of the NIPAs, while the CPI is based on the out-of-pocket expenditures of all urban households. Therefore, some items in the PCE price index are not within the scope of the CPI, and some items in the CPI are not within the scope of the PCE price index. The scope effect has two parts: The first part estimates the percentage-point contribution to growth in the PCE fixed-weight price index for items not included in the CPI; the second part estimates the percentage-point contribution to growth in the CPI for items not included in the PCE price index.

Other effects: The remaining differences between the PCE price index and the CPI include seasonal adjustment differences, price differences for gasoline and airline transportation, and "other" differences; the last calculated as a residual to balance the reconciliation.

  CPI Consumer price index
  PCE Personal consumption expenditures


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