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July 21 -- The Bureau of Labor Statistics (BLS) invites comments on its request that OMB approve data collection for the Commodities and Services (C&S) component of the Consumer Price Index (CPI) for 2020-23. Comments are due by August 20, 2020.
 
The BLS is directed by law to collect, collate, and report full and complete statistics on the conditions of labor and the products and distribution of the products of the same; the CPI is one of these statistics. The collection of data from a wide spectrum of retail establishments and government agencies is essential for the timely and accurate calculation of the C&S component of the CPI.
 
Trained BLS Economic Assistants collect all CPI data by one of the following methods: (1) visiting the retail outlets (which include brick and mortar, catalogs, and websites) and collecting data without any respondent assistance, (2) visiting the retail outlets and collecting data that are provided orally by a respondent, (3) contacting the respondent by telephone to collect data, (4) using email when requested by the respondent, or (5) accessing price data from the outlet’s website when requested by the respondent.  In all cases, the collection of data is completed by BLS employees -- respondents are not asked to fill out any forms. A small number of items are priced by national office staff from data supplied by vendors, for example used cars and trucks are priced using data from the National Automobile Dealers Association. The BLS is also testing the feasibility of using company transaction data in lieu of in-store, telephone, and internet collection.
 
The BLS uses a computer assisted data collection (CADC) method for initiating and pricing the C&S part of the CPI program. This CADC technology enables BLS employees to collect data in a structured way that promotes the accuracy of collected data, and ensures that the security of the data is maintained through tracked electronic transmission.
 
The C&S items for which data are collected with the CADC instrument represent approximately 68% of the expenditures included in the CPI, the other 32% being represented by the two housing components, residential rent and owners’ equivalent rent.
 
As has been our past practice, but especially now, during the COVID-19 pandemic, the top priority of the CPI program is the health, safety, and well-being of all staff.  In an effort to ensure the safety of data collection staff, personal visit data collection for the C&S survey has been suspended and personal visit collection burden has been reduced to zero. Data collection activities are being conducted via telephone, email, and internet. We will partner with our respondents to determine how we transition back to personal visit collection which we expect will occur on a state-specific basis.
 
Because of the complexity, importance and diversity of its universe, the construction of the CPI requires a complex set of statistical techniques and samples. Conceptually, the potential universe of price quotations for the CPI is the total set of prices, placed in one-to-one correspondence to the total set of purchases of all urban consumers. The sample for ongoing pricing for the C&S portion of the CPI is approximately 35,547 outlets with 89,708 price quotations per month.

The outlet response rate for ongoing pricing is 90.1% per month over the time period from October 2018 to September 2019. The roughly 10% non-response rate in outlets is due to refusals or outlets being temporarily unavailable for pricing.   

The response rate at initiation is 79.1% of eligible outlets.  During initiation 10.6% of outlets are terminated, either because they refuse to participate (2.0%), are ineligible (7.7%), or cannot be located (0.9%).  
 
A multi-stage stratified sampling process is employed for the CPI.  The four main stages of selection are:  (1) the sampling of geographic areas, (2) the sampling of outlets within the geographic areas, (3) the sampling of entry-level items (ELIs) to be priced in the outlets, and (4) the sampling of unique items from each ELI in each outlet. Each year BLS systematically selects a portion of the sample of outlets and quotes such that over a four-year period most C&S sample outlets have a chance to be replaced. Not only does this re-establish the distribution of the sample, incorporate new outlet construction and reflect shifts in outlet preferences, but it also allows many respondents to rotate out of the sample.  Thus, all respondents are not indefinitely retained in the sample.  
 
Based on December 2018 CPI-U relative importances, 56% of the CPI is calculated using a Geometric mean formula and 44% is based on the Laspeyres index formula.  The Laspeyres portion is composed of Rent (8%), Owners’ equivalent rent (24%), and C&S items (12%).

A price index constructed using geometric means more closely approximates a true cost-of-living index than does the Laspeyres, for some items.  This occurs because the geometric means formula, unlike the Laspeyres formula, implicitly assumes that product substitution takes place when relative prices change.  The geometric means formula assumes that relative expenditures are kept constant over time.

The Laspeyres index formula in concept simply measures the change in the weighted arithmetic mean of prices. As a fixed-weight index, the Laspeyres formula assumes that consumers do not change the amount of each item purchased as relative prices change.  
 
BLS CPI webpage: https://www.bls.gov/cpi/
Federal Register notice for 2020-23 CPI C&S component: https://www.federalregister.gov/documents/2020/07/21/2020-15595/agency-information-collection-activities-submission-for-omb-review-comment-request-consumer-price
BLS submission to OMB:  https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202002-1220-001  Click on IC List for data collection forms, View Supporting Statement for narratives on uses, data collection and estimation methods, and implementation plans.
 
Point of contact:  Rob Cage, Assistant Commissioner, Division of Consumer Prices and Price Indexes, Office of Prices and Living Conditions, BLS  202-691-6959   cage.rob@bls.gov    

The AEAStat primer on how to respond to a call for comments on a federal data collection is available at https://www.aeaweb.org/content/file?id=5806

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