Potential Benefits from the Use of Scanner Data in the Construction of the Cpi

Currently, the US Bureau of Labor Statistics(BLS) sends field representatives to manually collect price quotes when constructing the Consumer Price Index(CPI). Many of the nation’s retailing outlets now have scanner check-outs that record their prices and expenditures. There is an opportunity for BLS to use these scanner records in the construction of its CPI. Some of the potential benefits from the use of scanner data are the ability to construct superlative indices such as the Törnqvist, to reduce formula bias, to reduce the mean squared error of the CPI, to incorporate the introduction of new products on a more timely biases, to provide a more accurate sampling procedure within stores and to account for expenditure shifts across outlets. I discuss each potential benefit separately in this article.