The Bureau of Labor Statistics will unveil an experimental index Thursday that holds the promise of bringing the U.S. closer to an accurate measure of the cost of living.
The release of the long-awaited experimental consumer price index marks the next significant step toward bringing the nation’s keystone measure of inflation into alignment with the actual cost of living.
The index incorporates a geometric mean method of calculating the measure used by the government to adjust benefits payments and tax brackets for inflation.
The bureau hopes the index will do a better job of accounting for consumers’ ability to substitute cheaper items–to switch to chicken, for example, when beef prices rise.
The current method, known as the Laspeyres style of tabulation, has a difficult time catching cost-related shifts in consumer spending.
That is a key reason many economists and lawmakers say the CPI overstates the cost of living.
“We’re going to see if the new index is more accurate,” said Patrick Jackman, senior bureau economist.
After publishing the experimental index for the rest of 1997, the agency will decide whether the new method proves to be more accurate.
If the geometric mean formula proves useful, the agency will make plans to implement the changes to the mainstream CPI by January 1999 at the earliest, Jackman said.
