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

BEA now prepares supplemental personal consumption expenditures (PCE) price and quantity indexes that are based on market transactions for which there are corresponding price measures. Specifically, the price index provides a measure of the prices paid by persons for domestic purchases of goods and services, which may be a useful measure of consumer prices for some analytical purposes.

The index is composed of PCE components that are deflated by either a detailed consumer price index (CPI) or a producer price index. It excludes most imputed expenditures, such as services furnished without payment by financial intermediaries except life insurance carriers, but imputed space rent for owner-occupied nonfarm housing is included in the index. (We note that its inclusion improves comparability with the CPI. Owner's equivalent rent within the CPI is measured by reweighting the renter sample of market transactions.) It excludes expenses of nonprofit institutions serving households, most insurance purchases, gambling, margins on used light motor vehicles, and expenditures by U.S. residents working and traveling abroad. Household insurance premiums, which are deflated by the CPI for tenants’ and household insurance, are included in market-based PCE; medical and hospitalization and income loss insurance, expense of handling life insurance, motor vehicle insurance, and workers’ compensation are excluded.

Two price indexes are prepared: An overall market- based PCE measure and a market-based PCE measure that excludes food and energy. Current-dollar estimates, chained (2000) dollar estimates, and chained-type price and quantity indexes are shown as addenda items in the underlying detail PCE tables on BEA’s Web site.