The 1998 Revision of the Consumer Price Index

Family Economics and Nutrition Review, Summer, 1998

Source: Greenlees, J.S. and Mason, C.C., 1996, Overview of the 1998 revision of the Consumer Price Index, Monthly Labor Review 119(12):3-9.

History of the CPI

The CPI was developed during World War I to help establish cost-of-living adjustments for workers in shipbuilding centers because prices were increasing so rapidly. Regular publication of a national index began in 1921, based on an expenditure pattern corresponding to the 1917-19 period. Since then, the Bureau of Labor Statistics (BLS) has updated (or revised) the CPI five times (table 2). Each revision, in addition to updating expenditure weights because people's buying patterns had changed substantially, brought important methodological innovations that improved the Index's accuracy and representativeness.

Table 2. Previous CPI revisions

Release of    Expenditure
revised CPI   base period   Notable innovations

   1940         1934-36     Introduced the concept of a sample of
                              cities and items, and the principle
                              of imputation
   1953          1950       Expanded population coverage to
                              represent all urban wage earner and
                              clerical worker families
   1964         1960-61     Expanded population coverage to
                              represent individuals as well as
                              families; introduced computer
                              processing
   1978         1972-73     Expanded population coverage to
                              represent all urban consumers;
                              improved methodology for construction
                              of outlet sample frame; introduced
                              probability sampling techniques into
                              the selection of the item and outlet
                              samples
   1987         1982-84     Expanded scope of systematic outlet
                              rotation; introduced advanced sample
                              allocation model

Source: Greenlees, J.S. and Mason, C.C., 1996, Overview of the 1998 revision of the Consumer Price Index, Monthly Labor Review 119(12):3-9.

The 1998 Revision

Effective with publication of CPI data for January 1998, movements in the Index will be based on 1993-95 consumer expenditures. These data will be used to calculate new expenditure weights. The 1998 market baskets will reflect new geographic area samples, new item structure, new outlets in which items are priced, and new expenditure weights.

Geographic Area Sample

The geographic sample selection process uses stratified sampling to represent the U.S. urban population. There will be 87 primary sampling units based on the 1990 decennial census, replacing the current ones that are representative of the 1980 U.S. population distribution. Of these, 36 will be new, with new outlet and item pricing samples for the 1998 revised Index. The remaining 51 are carried over from the current CPI geographic sample.