Labor Dept Says It Made Error in CPI
WASHINGTON (Reuters) - The U.S. government said on
Wednesday that a computer glitch had caused it to mismeasure
the main U.S. inflation gauge, the Consumer Price Index, and
that it was taking the unusual step of revising past data.
However, the Labor Department's Bureau of Labor Statistics
said in a statement: ``The general pattern of consumer price
behavior this year was little affected.''
For example, it said, from December 1999 to August 2000 the
CPI rose by 2.7 percent on a non-seasonally adjusted basis
according to the corrected data. That compared with a 2.6
percent gain originally published. The revisions to the CPI
will cover the January to August 2000 period.
The department said the error involved software used to
calculate the residential rent and owners' equivalent rent
components of the CPI.
Labor said more details would be released at a 9:30 a.m.
(1330 GMT) briefing on Thursday by Bureau of Labor Statistics
Commissioner Katharine Abraham.
Fears of a significant change in the data had pressured the
U.S. bond market in early trade and negative sentiment
persisted even after the Labor Department statement.
One of the reasons the CPI announcement garnered so much
attention is that even though the government routinely revises
major economic statistics such as the gross domestic product
and monthly payrolls data, it is very rare for past CPI data to
be revised.
The last time Labor did so was in 1974, when it revised six
months of data because of an error in the calculation of the
cost of air-conditioning for used cars. It also made some
revisions in 1971.
The CPI is used for a host of purposes by government and
the private sector, including the indexation of Social Security
benefits and the federal tax code as well as worker wages in
union contracts.
One reason the CPI is rarely revised is that unlike many
other economic data, which are based on surveys of businesses,
the CPI gives a monthly snapshot of prices for consumer goods.
It is based on data collected by price-checkers around the
country who visit supermarkets and shopping malls and make
phone calls to gather price quotations.
The announcement about the calculation error may put a
spotlight on lobbying efforts by private economists to get
Congress to boost funding for statistical agencies. Officials
at the agencies have been trying to push their case for more
money, arguing they need to upgrade computers that are less
than state-of-the-art and develop new ways of measuring an
increasingly complex U.S. economy.
Economists said the CPI revision was not drastic enough to
alter the sentiment of the inflation-wary U.S. Federal Reserve.
``The bottom line is the magnitude is not very big. It is
not enough to get excited about,'' said Marty Mauro, senior
economist at Merrill Lynch in New York.
``It does say that the inflation picture is a little worse
than expected. But the Fed is more forward-looking than that,
so the fact that inflation was a little bit higher earlier this
year is not going to fundamentally change their policy.''
Despite the CPI's prominence in federal programs such as
Social Security and in the private sector, the Fed has
de-emphasized it in recent years, in part because of qualms
about its accuracy.
Earlier this year, the Fed stopped using the CPI in its
twice-yearly formal reports to Congress on the economy.
Instead, it began using the Commerce Department's price
index for personal consumption expenditures, which is part of
the GDP report. Although some CPI numbers are used to calculate
that index, a Commerce Department economist said the CPI
revisions would have only a minor impact on the PCE index since
the housing component -- the source of the CPI error -- makes
up a smaller portion of that measure than of the CPI.
For his part, James Glassman, senior economist at Chase
Securities in New York, said the admission of the computational
error bolstered his confidence in government statistics.
``You constantly hear the argument that the government is
cooking the books,'' he said. ``How could a government possibly,
that was trying to hide something, want to tell you about a
computational error six weeks before an election?'' |
