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PPI and CPI seasonal adjustment: an update
Jonathan C. Weinhagen, Jeffrey S. Wilson, and Steven M. Muri
Jonathan C. Weinhagen, Jeffrey S. Wilson, and Steven M. Muri are economists in the Office of Prices and Living Conditions, Bureau of Labor Statistics. Email: weinhagen.jonathan@bls.gov, wilson.jeff@bls.gov, or muri.steven@bls.gov
A new update of BLS seasonal adjustment procedures ensures that differences between seasonally adjusted PPI and CPI series are due to the underlying unadjusted data, and not to differences in seasonal adjustment methods; in a further improvement, PPI and CPI analysts are now coordinating their efforts.
In November 2006, the first-released1 seasonally adjusted producer price index (PPI) for gasoline jumped 17.9 percent, while the seasonally adjusted consumer price index (CPI) for gasoline fell 1.6 percent. The disparity between the two series resulted from differences in the indexes’ seasonal factors for gasoline. Seasonal factors are applied to unadjusted indexes to remove within-year seasonal patterns from time series, allowing for more comparable month-to-month index analysis.
An initial investigation indicated that methodological differences in the PPI and CPI were responsible for the differences in seasonal factors for gasoline. In particular, the PPI and CPI differed in their selection of data points to model as interventions for the series. Intervention modeling is used during the estimation of seasonal factors to remove the effects of nonseasonal events that can distort the observed seasonal patterns of an index.
In 2007, the Bureau of Labor Statistics (BLS, the Bureau) undertook an effort to further investigate differences in seasonal adjustment methods between the PPI and the CPI, with an eye toward developing a more unified approach to seasonal adjustment. PPI analysts and CPI analysts worked together and with a group of BLS time-series experts to develop that approach.
This excerpt is from an article published in the June 2010 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
Footnotes
1 The first release of a seasonally adjusted price index occurs along with the regular monthly release of unadjusted indexes. Indexes in the current year are adjusted by means of seasonal factors from the corresponding month of the previous year.
Consumer Price Indexes
Producer Price Indexes
Addressing misconceptions about the Consumer Price Index. — Aug. 2008.
Price measures of new vehicles: a comparison.—Jul. 2008.
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