July 13, 1999 (The Editor’s Desk is updated each business day.)

Transportation prices and the new research series

Upward adjustments to measured changes in transportation prices occurred as often as downward adjustments in the new CPI research series. In contrast, the research series for the overall Consumer Price Index was adjusted downward in every year except one in the 1978-98 study period.

[Chart data—TXT]

Transportation inflation was adjusted downward in 9 years, when comparing the research series and the official series. There also were 9 years with upward adjustments, and 3 years in which the rates of price changes were identical in the two series. The net effect of the adjustments over the 1978-98 period was about zero—the average annual growth rate of transportation prices was actually 0.03 percentage point higher in the research series.

Several offsetting changes contributed to the tiny net effect on transportation prices. The research series reflects downward adjustments for changes in the quality of used cars and for improved index-number formulas. However, there were upward adjustments due to deleting the index for automobile finance charges and to backing out a prior adjustment for changes in automobile quality involving mandated pollution controls.

The BLS Consumer Price Index program produces CPI data. BLS has made numerous improvements to the CPI over the years, which have increased the accuracy of the index; however, the official historical price indexes are not adjusted to reflect the improvements. Find more information on the CPI research series in "CPI research series using current methods, 1978-98," by Kenneth J. Stewart and Stephen B. Reed, Monthly Labor Review, June 1999. It is important to note that the CPI research series has certain limitations and that it is subject to revision. Annual percent changes are December-to-December changes. Also, note that in the chart positive differences reflect downward adjustments in the research series and negative differences reflect upward adjustments.