Comparing the Consumer Price Index and the Personal Consumption Expenditures Price Index

Abstract

N THE United States, there are two primary mea­ sures of the prices paid by consumers for goods and services. One is the Consumer Price Index for All Ur­ ban Consumers (CPI) prepared by the Bureau of Labor Statistics (BLS), and the other is the Personal Con­ sumption Expenditures (PCE) chain-type price index prepared by the Bureau of Economic Analysis (BEA). These two price indexes have different purposes and uses. Thus, they are constructed differently and tend to behave differently over time. 1 Chart 1 shows the quar­ terly growth rates for the two indexes from the first quarter of 2002 through the second quarter of 2007. Although the magnitude and direction of these differ­ 1. The CPI measures the change in prices paid by urban consumers for a market basket of consumer goods and services; it is primarily used as an economic indicator and as a means of adjusting current-period data for inflation. The PCE price index measures the change in prices paid for goods and services by the personal sector in the U.S. national income and product accounts; it is primarily used for macroeconomic analysis and forecasting.

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