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Thursday, April 17, 2014

Computing the CNMI’s Consumer Price Index

I would like to clarify my concern about the CNMI’s Consumer Price Index. Two years ago, the then director of the Central Statistics Division, Ivan Blanco, asked me if I had any objection to having a consultant from the Secretariat of the Pacific Communities simplify the calculation process. The statistical clerk who had previously calculated the CPI had resigned the previous December and no one in the division was trained on how to use the CPI calculation program. I told him that “as long as the ‘simplified method’ retained the same Bureau of Labor Statistics method of calculating the CPI,” I had no objection.”

When this new “simplified” calculation method was introduced, I did a parallel calculation of the first three quarters of 2010 to make certain that the CPIs were identical. I had been given the price data from the Central Statistics Division and had been told that it was identical to that which the SPC consultant used. After comparing the two calculations, I discovered that my percent changes and indexes did not match up with the SPC’s calculations. Apparently there was a misunderstanding. The SPC consultant had used the same data but made a number of corrections to the data to which I was not privy to. As a result, our two calculations differed. Having worked on developing your CPI for over eight years, this concerned me that it was no longer accurately measuring price change.

Recently, this consultant provided additional examples with fictional prices showing that both methods result in the exact same percent changes and indexes. While we have differences of opinion about which method is actually the “simpler” method, I no longer have my concerns that the CSD is now using a different method from that used by the BLS to calculate their quarterly CPIs.

Brian Hannon
Survey Statistics Specialist

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