New Quality Adjusted Price Indexes for Nonresidential Structures (PDF)

Accurate, quality adjusted prices for nonresidential structures are necessary for a good understanding of the functioning of the economy. In order to improve its estimates of nonresidential structures’ prices, the Bureau of Economic Analysis (BEA) has developed new quality adjusted price indexes for several types of nonresidential structures. The new indexes will be incorporated into the comprehensive revision of the national income and product accounts (NIPA’s) later in 2003. They are designed to replace the existing price index estimates, which are constructed using an indirect methodology. The new indexes are expected to be used only until the Bureau of Labor Statistics introduces Producer Price Indexes for nonresidential structures later in the decade. The price indexes are based on hedonic regressions, and yield rates of inflation that are slightly higher than those yielded by corresponding matched-model price index estimates based on the same source data. Also, relative to the existing price indexes, the new price indexes will slightly increase estimated rates of inflation for nonresidential structures, beginning with 1998. BEA will use the new price indexes to deflate related structure types within private nonresidential structures and Federal and state and local government gross investment in structures.

Bruce T. Grimm