Friday, March 19, 2004
How the CPI is calculated
A professional acquantance writes a morning commentary, anonymously. This is one of the great tragedies of financial literature, because this particular author is: 1) astute; 2) talented; 3) F'n hysterical. What follows is their take on the recent CPI data:
"Here you go. This is excerpted straight from the horse’s mouth. Any italics or underscoring are mine:“The Consumer Price Index (CPI) is a measure of the average change in prices over time of goods and services purchased by households . . .
The CPI is based on prices of food, clothing, shelter, and fuels, transportation fares, charges for doctors' and dentists' services, drugs, and other goods and services that people buy for day-to-day living . . .
Prices are collected in 87 urban areas across the country from about 50,000 housing units and approximately 23,000 retail establishments-department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments . . .
Prices of fuels and a few other items are obtained every month in all 87 locations . . .
Prices of most goods and services are obtained by personal visits or telephone calls of the Bureau's trained representatives . . .”
Is that right? Trained representatives can just phone around for prices? That opens up a whole Pandora’s box, doesn’t it? How about this scenario:Ring-ring. Ring-ring.
“Yo. Bay Ridge Deli. Paulie speakin’”.
“Good morning. This is Ms. Dolfuss of the Bureau of Labor Statistics calling. I wonder if I might trouble you for a few prices for our survey.”
“Any-ting for you, Doll-Face.”
“May I please have the price of an 8 oz. package of Jell-O?”
“Jell-O? Jell-O in dis neighborhood? Whatsa’ matta’ wi-choo? We got Tira Misu, Spumoni, Tortoni, Cannoli, da whole nine yards. But Jell-O? Fuhgeddaboudid. Sorry, I just can’t help you out on dessert. But I got a load of vinegar peppers comin’ in tonight from Jersey. I can give you a good price. How many you want?”
“Okay. Great. 8 oz. Jell-O, forty-nine cents. My next item is the amount of rent you pay each month for your premises.”
“Amount of rent we pay here? Lady, you gotta’ be kiddin’ me. The landlord is in to the local shy operation for 50 large. Haven’t seen him in two years. Yeah, we pay rent alright. Any-ting else I can help you wit?”
“Okay. Great. Rent on 1200 sq. feet of commercial store front, $1,800 per month. My next item is the price of a 28 oz. can of tomatoes.”
“Tomatoes? We got hot and cold runnin’ tomatoes. You talkin’ crushed, pureed, whole, plum, sliced, diced, bada-bing, we got ‘em all. I got some nice San Marzanos, if you’re interested. Could cut you a sweet deal if you take, say, 10 cases. Cash on the dash.”
“Thank you, no, I just need the price of a single can.”
“A single can? Hang on. I gotta’ ask Ralphie about dat . . . Yeah, okay, Doll-Face, Ralphie says to tell you we ain’t never sold a single can of tomatoes in the whole 42 years we been runnin’ this shop. Whadda’ ya’ gonna’ do wit a single can of tomatoes? Make gravy for some fleas?”
“Okay. Great. 28 oz. can tomatoes, one dollar and nineteen cents. My next item is American cheese. Can you price a 4 oz. portion?”
“American cheese? Next thing you’ll want me to price is Wonder Bread! Don’t forget the Miracle Whip. Wanna’ Scooter-Pie to go wit dat sang-wich? Look, lady, I got provolone. I got semolina bread. American cheese? Yeah, I got your American cheese, right here, baby. Ralphie says he’s got some salsicce, special for you, too.”
“Great. American cheese. 4 oz. portion, one dollar and thirty-four cents. Thank you very much for your time in participating in this CPI survey. May I include you in next month’s poll?”
“No problem. You mean this was a CPI survey? Why didn’t you say so in the first place? CPI’s playin’ LSU next weekend, ain’t they? Ya’ wouldn’t happen to know the over/under, would ya’?”
And there you have it. A typical phone survey, dialing for prices in the metropolitan area, brought to you by a trained, government representative.
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