CPI Error Stirs Concern on Data

Sep 28, 2000

Statistics: The Labor Department says the index will be revised because of a computer software problem.

From Reuters

     WASHINGTON--A seemingly tiny error the government disclosed Wednesday of its measure of U.S. inflation is a worry to economists who see it as a potential red flag for the reliability of vital economic data.
     The Labor Department said that because of a computer software problem it will revise its key measure of U.S. price performance, the consumer price index, for the period from January through August.
     It said "the general pattern of consumer price behavior" this year was unaffected, but the department's admission raised questions whether key agencies have enough money to do their jobs properly.
     "We're at a critical stage of the game in which accurate economic data is crucial so it has to be right," said economist Diane Swonk of Bank One Corp. in Chicago.
     Just a rumor of a problem with statistics can shake the confidence of financial market participants and business decision-makers who use it for everything from portfolio management to decisions on investments in plants and equipment, she said.
     Meanwhile Wednesday, the government released new statistics on the orders made in August for costly durable goods, a report consistent with a slowing but still strong U.S. economy.
     The Commerce Department said the value of new orders for durable goods such as cars and furniture designed to last three years or more climbed 2.9% in August to a seasonally adjusted $216.12 billion. That came after a 13.1% plunge in orders in July.
     August's increase in durable goods orders, the third in four months, was driven by a 6.5% gain in transportation equipment, spurred by orders for aircraft. Orders for defense capital goods also rose a massive 18.2%.
     The Labor Department's Bureau of Labor Statistics said it had found an error in software used to calculate rents and owners' equivalent rents of the CPI. It said that, as a result, from December through August the CPI rose by 2.7% on a non-seasonally adjusted basis instead of 2.6%.
     The BLS and the Commerce Department's Bureau of Economic Analysis are the key statistics-gathering agencies that compile intently awaited economic measurements of everything from price changes to consumer spending and gross domestic product--the broadest measure of total economic performance.

Copyright 2000 Los Angeles Times