The impact of changing consumer expenditure patterns at the onset of the COVID-19 pandemic on measures of consumer inflation

This article examines the impact that changes in consumer spending patterns that occurred during the early stages of the COVID-19 pandemic had on measures of consumer inflation. When spending patterns change quickly, fixed-weight price indexes can become biased. The authors focus on the effects that these changes had on the Consumer Price Index for All Urban Consumers (CPI-U). During the first half of 2020, prepandemic weights were used to calculate the CPI-U. The authors use contemporaneous weights to construct several alternative price indexes and compare them with the CPI-U for the same period in order to quantify the effects of the changing expenditure patterns. They also look at which expenditure categories drive the divergence between the fixed-weight CPI-U and the alternative indexes constructed with contemporaneous weights. Lastly, the authors compare the contemporaneous-weight indexes with indexes constructed with real-time expenditure data.