[Federal Register Volume 87, Number 163 (Wednesday, August 24, 2022)]
[Notices]
[Pages 52030-52031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17994]


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DEPARTMENT OF LABOR

Bureau of Labor Statistics


Updating Spending Weights Annually Based on a Single Calendar 
Year of Data

AGENCY: Bureau of Labor Statistics, Department of Labor.

ACTION: Notice of action.

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SUMMARY: Effective with the February 2023 release of CPI data for 
January 2023, BLS will update weights annually for the Consumer Price 
Index based on a single calendar year of data, using consumer 
expenditure data from 2021. This change impacts the CPI for urban 
consumers (CPI-U), wage earners and clerical workers (CPI-W), initial 
and interim versions of the Chained CPI-U, and CPI research series. 
This reflects a change from prior practice of updating weights 
biennially using two years of expenditure data. This shift will result 
in changes to some documents available from CPI, including the CPI 
Relative Importance tables Report and CPI Handbook of Methods.

DATES: The transition to annual weights will occur with the release of 
January 2023 data, scheduled for release Friday, February 10, 2023.

[[Page 52031]]


FOR FURTHER INFORMATION CONTACT: Bradley Akin, Information and Analysis 
Section, Consumer Price Index, Bureau of Labor Statistics, telephone 
number 202-691-7000 (this is not a toll-free number), or by email to: 
[email protected].

SUPPLEMENTARY INFORMATION: To improve the accuracy and relevance of the 
Consumer Price Index (CPI), the Bureau of Labor Statistics (BLS) plans 
to update spending weights annually based on a single calendar year of 
data. This change will be effective with the calculation of January 
2023 indexes using consumer expenditure data from 2021.
    Historically, the BLS updated spending weights every 10 years to 
reflect spending habits of urban consumers. In 2002, the BLS began 
updating spending weights every two years to reflect changes in 
consumer spending more rapidly. Over time, many countries have adopted 
annual CPI spending weight updates. The BLS produces continuous 
estimates of consumer spending, enabling an annual weight update 
methodology.
    Recent research conducted by the BLS demonstrates annual spending 
weight updates increase the overall accuracy of the CPI. As an accurate 
cost-of-living measure, the CPI should reflect consumers' changing 
spending habits. The formula the BLS uses to calculate the CPI-U and 
CPI-W can yield misleading results if spending weights are updated too 
frequently. The BLS conducted research in 2021 that demonstrates annual 
spending weight updates more closely reflect consumers' changing 
spending habits without yielding misleading results. The estimated 
impact between 2002-2020 is a reduction in the 12-month change of the 
CPI-U index of 0.036 percentage points, which is a 13% reduction in the 
impact of upper-level substitution bias. Upper-level substitution bias 
refers to the impact of using fixed weights even though consumers 
change (substitute) what they buy.
    Annual spending weight updates enable the BLS to maintain relevancy 
when there are large shifts in consumer spending, as happened during 
the COVID-19 pandemic. While sudden shifts in spending habits cannot be 
reflected in an annual update, annual spending changes are an 
improvement over longer periods. The BLS analyzed annual spending 
changes and confirmed the spending weight update in January 2022 should 
use consumer spending from 2019 and 2020. While in past years, the most 
recent year is typically the most relevant, spending in 2020 was 
anomalous enough that averaging two years of data produced the most 
relevant spending weights for indexes in 2022. For 2023, the BLS 
determined consumer spending data in 2021 would be more relevant than 
2019 and 2020. It is expected that moving forward, using the most 
recent year of data will produce the most relevant spending weights for 
CPI calculation.

    Signed at Washington, DC, on this 16th day of August 2022.
Eric Molina,
Acting Chief, Division of Management Systems.
[FR Doc. 2022-17994 Filed 8-23-22; 8:45 am]
BILLING CODE 4510-24-P