How many more errors are we gonna hear about????
Labor Dept Says It Made Error in CPI
By Caren Bohan
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?'' |
