‘Temporarily Unavailable’
The bureau is considering adjusting its usual procedures, BLS economist Jonathan Church said by e-mail. Alternatives include pretending 2020 never happened and sticking with data from prior years, or adjusting the Covid-era numbers based on secondary sources, says Randal Verbrugge, a senior economist at the Federal Reserve Bank of Cleveland. Either way, there’s a risk of introducing further mismeasurements.
Global peers face similar problems. The Organization for Economic Cooperation and Development is due to publish some advice for member states.
The second issue revolves around data collection. The BLS employs about 400 researchers who collect information about prices via two main surveys: one is focused on businesses that sell goods and services, and the other asks landlords and tenants about rent payments.
Before the pandemic, more than 70% of data in the first survey—and some 40% of the second one—was compiled during in-person visits, a mix that had been fine-tuned over the years. But last month, 84% of the price data was collected online, with the rest coming from telephone surveys—while the rent survey was conducted entirely by phone.
“These factors resulted in an increase in the number of prices considered temporarily unavailable and imputed,” the bureau said in its latest CPI report. “Many indexes are based on smaller amounts of collected prices than usual.”
The prices of peanut butter, lemons and broccoli were left blank in the national numbers for February. The data on new-car prices in Detroit, known as Motor City, was deemed “inadequate for publication.”
Online Challenge
While the price inspectors should soon be able to go back to the stores, consumers may choose not to. The shift to e-commerce accelerated during the pandemic: it accounted for 19% of core U.S. retail sales in the fourth quarter of 2020, up almost 4 percentage points from a year earlier.
Competition between online and traditional retailers is reckoned to put downward pressure on inflation. But Harvard’s Cavallo says his index of online prices has been rising rapidly since November, a shift that hasn’t been reflected in the CPI.
And broader problems with measurement may emerge, because online sellers can easily customize prices for individual buyers and adjust them thousands of times a day via algorithms.
“It does pose a challenge for a statistical agency,” says Verbrugge at the Cleveland Fed. “How do they get their hands on the actual prices that consumers are being charged?”
This article was provided by Bloomberg News.