Questions arise! U.S. CPI "estimated proportion" rises to 36%

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The credibility of a key U.S. inflation indicator is coming under increasingly strict scrutiny. The United States is relying more and more on estimates rather than directly collected data to compile the CPI, which has sparked a great deal of questioning on the eve of the Federal Reserve’s policy decision.

On September 11, the U.S. Bureau of Labor Statistics (BLS) revealed that, in the August CPI report, the proportion of prices generated using a suboptimal estimation method known as “different-cell imputation” had soared from 32% a month earlier to 36%. This figure is not only the highest since records started in 2019, but also far exceeds the 9% proportion seen in February this year.

This method is used when it is not possible to obtain the price of a certain item in a specific region, and uses equivalent item data from other geographic areas as substitutes. This is considered a less accurate, “suboptimal option” for handling missing data issues.

The disclosure of this situation comes as the U.S. released the August CPI, with the data itself largely in line with market expectations and bolstering bets that the Federal Reserve will cut rates soon.

Economists believe that increased use of estimation methods undermines data accuracy. UBS inflation economist Alan Detmeister said that while it is not clear how much impact this substitution has at the macro level, the more important issue is that the total number of price quotes in the CPI has continued to decline over the past decade, increasing data volatility.

He made it clear in a conference call last month: “Overall, this is decreasing the quality of the CPI and its ability to track actual inflation.”

Staff Attrition and Political Pressure: Intensified Reliance on Estimates

The BLS’s increasing reliance on estimation methods is closely related to staff attrition and difficulties in data collection that the agency has faced in recent years.

According to reports, since Trump became president, the agency’s staff numbers have continued to decline. Although the BLS has not announced specific numbers, advocacy groups keeping in touch with current and former employees estimate that BLS staffing has dropped by at least 20%. The Trump Administration’s proposed 2026 budget would further reduce the agency's resources.

In addition, the BLS's own data collection has faced problems. In June this year, the BLS stated that, due to resource shortages, it had suspended CPI sample collection in three metropolitan areas, but its analysis believed this would have little effect on the overall CPI. However, by the end of July, the agency said about 15% of other regional sampling was also suspended, but did not specify how this would impact the inflation rate.

Omair Sharif, president of Inflation Insights LLC, said that these two notices regarding suspended data collection indicate that around 19% of prices in the CPI are now being estimated, up from 5.1% at the end of 2022. "If you stop collecting data in certain regions of the country, then the proportion of ‘different-cell imputation’ will increase.”

Concerns over BLS data quality have also arisen as the agency faces significant political pressure. After July’s employment report saw an unusually large downward revision, Trump fired the BLS commissioner and, without evidence, accused her of manipulating the data for political gain.

Amid a series of controversies, the U.S. Department of Labor’s Office of Inspector General, which oversees the BLS, said Wednesday it is launching a review into the “challenges” the agency faces regarding the CPI, Producer Price Index (PPI), and employment data revisions.

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