June 28, 2006 (The Editor’s Desk is updated each business day.)

A new experimental consumer price index

BLS has introduced an experimental consumer price index for the U.S. that follows, to the extent possible, the methods of the Harmonized Index of Consumer Prices (HICP), which is the European Union's official price index.

Comparison of U.S. CPI-XT and U.S. HICP, 2002-2005
[Chart data—TXT]

The U.S. HICP differs from the U.S. Consumer Price Index (CPI) in two major respects. First, the HICP includes the rural population in its scope. Second, and probably more importantly, the HICP excludes owner-occupied housing, in part because the methods for measuring price changes for owner-occupied housing are controversial in theory and difficult to achieve consensus on in practice.

To construct the experimental U.S. HICP, the CPI first was expanded to cover the entire (noninstitutional) U.S. population and then was narrowed to remove the owner-occupied housing costs that the HICP excludes from its scope.

The chart compares a specially constructed measure of U.S. inflation that covers both rural and urban areas (CPI-XT) with a new experimental measure, the U.S. HICP. The measures are relatively similar in the period shown, which may reflect the fact that the period was one of comparatively mild inflation.

These data are from the BLS Consumer Price Index program. To learn more, see "Comparing U.S. and European inflation: the CPI and the HICP," by Walter Lane and Mary Lynn Schmidt, Monthly Labor Review, May 2006. Percent changes in chart are December to December.

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