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January, 1987, Vol. 110, No.
1
New basket of goods and services
being priced in revised CPI
The Consumer Price Index (CPI) is being revised effective with publication of data for January 1987.1 As a part of the revision, the market basket of goods and services priced for the index is being updated to reflect how consumers are spending their money. Buying patterns can change over time as a result of changes in prices, demographic characteristics of the population, income, or tastes and habits. Historically, the Bureau of Labor Statistics has updated the CPI market basket approximately every 10 years. The uses of the CPI as a measure of inflation and the effects of economic policy, as a deflator of other statistical series, and as an income or benefits escalator require that it be current and accurate.
The last revision of the CPI market basket of goods and services took place in 1978 and was based on 1972-73 spending patterns. The revised 1987 CPI uses a market basket reflecting 1982-84 buying patterns. In addition, new definitions of some expenditure categories in the CPI are being introduced. This article describes how the market basket is constructed and compares the new basket with the previous one. Consumption changes that have taken place since the last revision are examined with respect to developments in prices, demographics, and other variables which may explain the observed market basket differences.
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Footnotes
1 This is the third of a series of article describing the Consumer Price Index revision. The other articles are John Marcoot, "Revision of the Consumer Price Index is now underway," Monthly Labor Review, April 1985, pp. 27-38; and John Marcoot and Richard Bahr, "The revised Consumer Price Index: changes in definitions and availability," Monthly Labor Review, July 1986, pp. 15-23.
Overview of the 1998 revision of the Consumer Price Index.—Dec. 1996.
Changing the item structure in the Consumer Price Index.—Dec. 1996.
The Consumer Price Index: underlying concepts and caveats.—Dec. 1993.
Basic components of the CPI: estimation of price changes—Dec. 1993.
Consumer prices in the 1980s.—Aug. 1990.
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