§ 591.221 How does OPM compute the consumer expenditure weights it uses to combine price indexes?

5 CFR 591.221OPM uses the following ten-step process to compute consumer expenditure weights:

5 CFR 591.221(a)(a) Step 1. OPM obtains the latest BLS tabulated CES data nationwide and for the Washington, DC, area.

5 CFR 591.221(b)(b) Step 2. In both the nationwide and DC area tabulated data, OPM replaces the homeowners' expenditures for shelter with estimated rental values of owned homes that are available elsewhere in tabulated CES data. Note: These replacements are consistent with the rental equivalence approach described in § 591.219.

5 CFR 591.221(c)(c) Step 3. OPM selects the central income groups in the nationwide CES tabulation.

5 CFR 591.221(d)(d) Step 4. OPM calculates the expenditure shares (i.e., percentages) for each central income group by dividing each of its DEC expenditures by total expenditures for the income group. OPM also calculates expenditure shares for total nationwide expenditures by dividing each nationwide DEC expenditure by total nationwide expenditures.

5 CFR 591.221(e)(e) Step 5. OPM computes a democratic distribution of expenditure shares by averaging the central income groups' shares at each DEC and higher level of aggregation.

5 CFR 591.221(f)(f) Step 6. OPM computes a set of ratios by dividing each expenditure share of the nationwide democratic distribution by the corresponding expenditure share of the total national distribution.

5 CFR 591.221(g)(g) Step 7. OPM computes estimated expenditures for Washington DC for each DC DEC and higher level of aggregation that BLS reported by multiplying the reported expenditure by the corresponding ratio derived in Step 6.

5 CFR 591.221(h)(h) Step 8. For each DC DEC and higher level of aggregation that BLS did not report, OPM computes expenditures for DC by distributing the DC expenditure calculated in step 7 using the distribution of expenditure shares derived in step 5.

5 CFR 591.221(i)(i) Step 9. As described in § 591.211(c), OPM classifies each DEC and aggregate into PEGs.

5 CFR 591.221(j)(j) Step 10. OPM computes expenditure weights by dividing each DEC or aggregate by the total expenditure derived from the DC expenditure computed in step 8. Therefore, the sum of the MEGs, PEGs, and DECs, will separately total 100, i.e., so that all consumer expenditures in the original tabulation are accounted for.