Different measures of inflation are required for different purposes. Consequently, the GDP accounts provide several measures to serve these various purposes.
Gross domestic purchases prices. BEA's featured measure of inflation in the U.S. economy is the percent change in the price index for gross domestic purchases. This index measures the prices of goods and services purchased by U.S. residents (including the imports that they buy), regardless of where the goods and services are produced. The gross domestic purchases price index is derived from the prices of personal consumption expenditures, gross private domestic investment, and government consumption expenditures and gross investment. Thus, for example, a decrease in the price of imported oil would reduce the prices paid by U.S. residents and thereby directly lower the price index for gross domestic purchases.
GDP prices. Another aggregate price measure is the price index for GDP, which measures the prices of goods and services produced in the United States. In contrast to the price index for gross domestic purchases, this index would not be directly affected by an increase in the price of imports. Imports are excluded from GDP because they do not represent U.S. production.
Personal consumption expenditures (PCE) prices. Prices for consumer spending on goods and services is a component of both the gross domestic purchases and the GDP price index. This index measures prices paid by U.S. consumers, and is often compared with the Bureau of Labor Statistics’ Consumer Price Index. For more information, see FAQ 555, “What accounts for the differences in the PCE price index and the Consumer Price Index?”
Updated: October 25, 2018