Frequently Asked Questions

Guidelines for Citing BEA Information | ID: 83 | Created: Dec-06-2005
Answer

What is the "market-based" PCE price index?

In addition to the price indexes for personal consumption expenditures (PCE) and for “core” PCE, which excludes the volatile components of food and energy, BEA prepares supplemental PCE price indexes that are based primarily on observed market transactions for which there are corresponding price measures.  Specifically, these “market-based” price indexes are composed of PCE components that are deflated by either a detailed consumer price index (CPI) or a producer price index (PPI).

Two supplemental price indexes are prepared:  An overall market-based PCE measure and a core market-based PCE measure that excludes food and energy.  These indexes are shown in the GDP and personal income news releases, in NIPA tables 2.3.4, 2.3.7, 2.8.4, and 2.8.7, and as addenda items in the underlying detail PCE tables.

The PCE market-based price index excludes most imputed expenditures, such as “financial services furnished without payment,” for which deflators are implicit, based on independent current dollar and chained-dollar estimates.  However, it includes “imputed rental of owner-occupied nonfarm housing,” which is deflated by the CPI for owner’s equivalent rent, so that the index will be comparable with the overall CPI.  (Owner's equivalent rent within the CPI is measured by reweighting the renter sample of market transactions.)  The PCE market-based index also excludes most insurance purchases, gambling, margins on used light motor vehicles, and expenditures by U.S. residents working and traveling abroad.  Household insurance premiums and normal losses, which are deflated separately by CPIs, are included in the market-based PCE index, but medical and hospitalization insurance, income-loss insurance, life insurance, motor vehicle insurance, and workers’ compensation insurance are excluded. Here are links to tables that show market-based PCE categories and the other-than-market-based PCE categories.

With the introduction of the reclassified PCE categories in the 2009 comprehensive revision of the national income and product accounts (NIPAs), the market-based PCE price index has been expanded to include the sales of primary services to households by nonprofit institutions serving households.  These sales, such as those from nonprofit hospitals and from higher education, are primarily deflated by either a PPI or a CPI.

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