What is it?
Not everyone purchases the same items. What each of us buys depends on our unique needs and individual makeup. While the aim of the CPI is to measure the change in prices that the typical consumer pays for a fixed basket of goods, the myCPI tool has been designed to capture some of the variation that occurs across different demographic characteristics including sex, size of household, age, income, education, and housing status. The result is 144 different market baskets that could yield a closer approximation to your cost of living than one based on the average consumer.
Why should I be interested in myCPI?
You may have read (or heard) official government price statistics and thought to yourself, "I'm not like the average household—this doesn't describe me at all. And the prices of the things I buy haven't done that!" The myCPI tool allows you to track the prices of a market basket that more closely reflects your spending habits and to compare your CPI to the national average.
For example, while the headline CPI rose 2.9 percent in 2009, a typical single female under the age of 35 without a college degree who rented her place and had an income greater than $70,000 saw the prices in her market basket rise by 5.6 percent. In that same year, a lower-income (less than $30,000) family of more than two, who owned their own home and was headed by an older (55+ years old), high school-educated person experienced a mere 2.3 percent increase in their price index.
How is myCPI constructed?
The myCPI tool is essentially a reweighting of the consumer market basket used to construct the national CPI. We turn to the Consumer Expenditure Survey (CE) to construct the relative importance values (or weights) for disaggregated spending categories for different demographic groups.
Starting with the 1998 CE, we calculate differing weights across the following demographic indicators:
- Housing: Homeowner or renter
- Household size: Single male, single female, couple, or more than two people
- Income groups: Less than $30,000, $30,000 to $70,000, or over $70,000
- Education: High school grad or less, college degree or more
- Age: Less than 35, 35 to 55, or over 55
We use the official price series of the Bureau of Labor Statistics for the following spending categories:
- Food at home
- Food away from home
- Alcoholic beverages
- Fuels and utilities
- Household furnishings and operations
- Owners' equivalent rent
- Rent of primary residence
- Medical care
- Other goods and services
- Average expenditures for each cohort are estimated exclusively from the interview portion of the Consumer Expenditure Survey. The Quarterly Interview Survey covers 95 percent of household expenditures.
- The BLS—in constructing the official CPI relative-importance values—relies on the Diary Survey for information on such frequently purchased items as household supplies and personal care items. (For a more complete, yet still readable, description of the methodology, see the technical notes section.)
- The estimated average expenditures for these cross-tabulated demographic groups likely fall below the threshold of reliability standards that the BLS uses because in some groups, the number of observations are small (fewer than 100 consumer units). This is despite using five-year windows to compute expenditure averages for the different demographic groups. The BLS produces cross-tabulated tables for at most two different demographic characteristics (for example, age and size of the household or a single consumer's gender and income) using data over a two-year period for increased reliability, and still notes that these data are likely to have large sampling errors.
- It is possible that your expenditure bundle could change over time and diverge from your cohort's average, which could underestimate the difference between changes in your cost of living and that of the average consumer.
- Because myCPI uses the official price series from the BLS, it doesn't capture any variability due to price differences that you may experience relative to the average consumer. For example, gasoline prices tend to differ by state because of differences in the excise taxes states levy on gasoline consumption. Because myCPI uses the BLS's price series, it doesn't capture these differences.
- These are not official price statistics and should not be used in escalation agreements or in wage negotiations.