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Definition of 'Chain Weighted CPI'
An alternative measurement for the Consumer Price Index (CPI), removing the biases associated with new products, changes in quality and discounted prices. The chain weighted CPI incorporates the average changes in the quantity of goods purchased, along with standard pricing effects. This allows the chain weighted CPI to reflect situations where customers shift the weight of their purchases from one area of spending to another.
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Investopedia explains 'Chain Weighted CPI'
The chain weighted CPI incorporates changes in both the quantities and prices of products. For example, let's examine clothing purchases between two years. Last year you bought a sweater for $40 and two t-shirts at $35 each. This year, two sweaters were purchased at $35 each and one t-shirt for $45.
Standard CPI calculations would produce an inflation level of 13.64%
((1 x 35 + 2 x 45)/ (1 x 40 + 2 x 35)) =1.1364
The chain weighted approach estimates inflation to be 4.55%
((2 x 35 + 1 x 45)/ (1 x 40 + 2 x 35)) =1.0455.
Using the chain weighted approach reveals the impact of a customer purchasing more sweaters than t-shirts.
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Search results for 'Chain Weighted CPI'
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http://www.investopedia.com/university/releases/cpi.asp
... The Chain-Weighted CPI is also released along with the Core CPI, and is gaining
momentum as a metric worth following, as Chain-Weighted CPI captures the ...
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http://www.investopedia.com/university/releases/personalconsumption.asp
... However, because the CPI will be released prior to this report, there is ... Strengths:
The chain-weighted PCE Index is considered a valuable longer term price ...
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http://www.investopedia.com/articles/economics/08/coincident-lagging-indicators.asp
... Also released by the BLS, the Consumer Price Index (CPI) tracks price ... The chain-weighted
index models the substitution effect the theory that buyers will ...
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http://financialedge.investopedia.com/financial-edge/0411/5-Government-Statistics-You-Cant-Trust.aspx
... inflation." While many economists support the changes to the CPI as being ... and the
move from fixed-weighted inflation measures to chain-weighted has increased ...
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http://www.investopedia.com/university/releases/gdp.asp
... Various chain-weighted indexes discussed in earlier topics are used to create
Real GDP Quantity Indexes with a current base year of 2000. ...
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http://www.investopedia.com/articles/economics/11/breaking-down-producers-price-index.asp
... of the PPI is calculated using a weighted average. ... provides a sense of the expected
CPI movement ... Although firms throughout the supply chain will typically hedge ...
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