U.S. Consumer Price Index: Experiences & Plans Crystal Konny, - PowerPoint PPT Presentation

Big Data in the U.S. Consumer Price Index: Experiences & Plans Crystal Konny, Brendan Williams, and David Friedman Federal Economic Statistical Advisory Committee Meeting - June 14, 2019 1 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Potential Benefits  Transaction prices  Larger sample sizes  Reduced collection costs  Reduced or eliminated respondent burden  Data descriptiveness  Real-time expenditures and weights 2 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 2 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Challenges  Methodological  Product life cycle, representativeness, data descriptiveness  Operational  Data lag, continuity, quality verification  Geographic structure  System design  Legal, Policy, and Budgetary  Contracting for data, webscraping agreements, confidentiality concerns 3 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 3 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Alternative Data  Data not collected through traditional field collection procedures by BLS staff ( traditional = in-store/on-phone/manually on website)  Three main categories:  Corporate  Secondary Source  Web/Mobile app scraping data  Decade of explorations & pilot projects – transition into production 4 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 4 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

General steps for Alt Data Projects  Determine what to pursue  Evaluate options  Evaluate selected source (definition, coverage, other quality dimensions)  Evaluate data quality over predefined time  Methods to test  Evaluate results  Transition to production? 5 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 5 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Criteria for use in production (to date)  As good or better than current pricing methodology  Does improvement in index justify any additional costs – cost effective?  In general, is it a good fit for CPI?  Use of short-term solution while continuing to research longer-term improvements 6 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 6 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Corporate Data 7 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

CorpX 100 80 60 40 20 0 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Cosmetics Misc. Goods Jewelry Dishes Misc. Household Men’s suits or blazers Women's tops, skirts, and suits Women’s outerwear

Impact of Incorporating CorpX 108 106 104 102 100 98 96 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Apparel CPI Apparel CPI + Transaction Data

CorpY  February 2012 refused to initiate new prescription drug sample  March 2015 agreement to supply data corporately  May 2015 first use in index 10 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 10 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

CorpY CorpY In-store Item Probability Proportional to Size (PPS) PPS based on price of Selection over the past year nationally by sales the last 20 prescriptions excluding lowest 10% of transactions sold Geography National Outlet Specific Price Average price of at least 100 Single price transactions Insurance prices Mostly cash prices National price Outlet specific price Per pill price Per prescription price Patent Loss Unit prices averaged across brand and Based on analyst generic monitoring of patents for an NDC Data Bimonthly odd collection Monthly and bimonthly Frequency odd/even collection 11 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 11 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Secondary Source Data 12 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Hospitals and Physicians’ Services  Relative Importance 4.04%; response rate for Medical Care is 48.1%  4,116 price quotes  Cash price overrepresented  High respondent burden  High collection costs  Difficult collection methodology Researching use of medical claims datasets 13 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 13 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

New Vehicle Observations 500,000 Number of Observations/Month 400,000 300,000 200,000 100,000 0 CPI JDPower 14 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 14 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Model Year Price Indexes 105 100 95 90 85 2009 2010 2011 2012 2013 2014 2015 80 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Experimental Index for New Vehicles Untaxed ) 115 110 105 100 95 90 200712 200812 200912 201012 201112 201212 201312 201412 201512 201612 201712 201812 Exp New Vehicles (Untaxed) Official New Vehicles (Taxed)

Web/Mobile app scraping data 17 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Crowd Sourced Motor Fuels Regular Unleaded Gasoline 120 115 110 105 100 95 90 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 CPI GasBuddy Data

Plans 19 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Establishing Priorities  Relative importance of the item  Number of quotes replaced  Cost of collection relative to cost of alternative data  Respondent relationship with BLS  Concentration of respondents in the sample  Ease of implementation  Accuracy issues in the current index… 20 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 20 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

In the works # concen prior Source % Item RI quotes tration issues ity of data sample Gasoline (all types) 4.344 3,778 M L H scrape 100 Other motor fuels 0.094 830 M L H scrape 90 New vehicles 3.695 1,900 L H H sec 100 Physicians' services 1.728 1,993 L H H sec 75 Hospital services 2.312 2,123 L H H sec 85 Cable and satellite television service 1.501 1,906 H H H sec 95 Wireless telephone services 1.693 1,279 H H H sec 98 Land-line telephone services 0.572 874 H H H sec 95 Internet services & electronic info providers 0.780 773 H H H sec 95 21 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 21 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

In pursuit # concent Source % RI quotes ration issues priority of data Experience sample Prescription drugs 1.316 4,641 H H H corp some Limited service meals and snacks 2.542 2,808 M L M corp pursue Delivery services 0.014 231 H L corp pursue scrape, Airline fares 0.683 1,745 H L M corp research Used cars and trucks 2.329 4,537 H H H sec Prod, seek 100 Postage 0.094 230 H L sec prod Leased cars and trucks 0.655 265 L H M sec research 100 Electricity 2.655 1,406 M M H seek Utility (piped) gas service 0.747 1,404 M M H seek 31.548 Rent and OER seek 22 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 22 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Conclusions  Significant portion of the CPI based on alternative data within 5 years  Substantial R&D on methodology needed  Alternative data introduced incrementally alongside monthly publication 23 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 23 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Questions for FESAC  Do you have any reactions to the general criteria CPI has used to date for determining fitness for use? Are we missing anything, etc.?  Do our criteria for establishing priorities in moving forward make sense to you?  Any advice for meeting the methodological challenges BLS faces with some of the alternative data sources? 24 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov 24 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov

Contact Information Crystal Konny Brendan Williams Branch Chief Senior Economist Branch of Consumer Prices Branch of Consumer Prices Konny.crystal@bls.gov Williams.Brendan@bls.gov David Friedman Associate Commissioner Prices and Living Conditions Friedman.david@bls.gov 25 — U.S. B UREAU OF L ABOR S TATISTICS • bls.gov