The geometric Young formula for elementary aggregate import and export price indexes

U.S. Import and Export Price Indexes are currently calculated with a modified Laspeyres formula at each level of aggregation. However, the geometric Young formula might be more appropriate for the first two levels of aggregation, which are the weight group and the classification group. If the geometric Young formula was used to calculate inflation from 2012 to 2022, then cumulative headline inflation would have decreased from 10.0 to 5.8 percent for imports and from 14.7 to 9.5 percent for exports. Half of this change comes from using the geometric Young formula at the weight-group level, and the other half comes from the classification-group level. The U.S. Import and Export Price Indexes (MXPIs), calculated by the U.S. Bureau of Labor Statistics (BLS), have many uses, including deflating trade values for gross domestic product estimates and assessing terms of trade. The formula used to calculate these indexes affects our understanding of the U.S.