Measuring Inflation under Pandemic Conditions

National statistical offices have faced unprecedented circumstances in the modern history of economic measurement. There were dramatically changing consumer expenditure patterns due to pandemic conditions, with lockdowns and fear of infection making many goods and services unavailable. We examine the implications of changing relative expenditures for the construction of Consumer Price Indexes, with special reference to the treatment of prices for unavailable products. We conclude that for many purposes, it would be useful for statistical agencies to establish a continuous consumer expenditure survey. We also examine various other practical pandemic induced CPI measurement problems. © 2022 W. Erwin Diewert et al., published by Sciendo.

Measuring real consumption and consumer price index bias under lockdown conditions

Millions of goods and services are now unavailable in many countries due to the current coronavirus pandemic, dramatically impacting on the construction of key economic statistics used for informing policy. This situation is unprecedented;hence, methods to address it have not previously been developed. Current advice to national statistical offices from the International Monetary Fund, Eurostat and the United Nations is shown to result in downward bias in the consumer price index (CPI) and upward bias in real consumption. We conclude that, to produce a meaningful CPI within the lockdown period, it is necessary to establish a continuous consumer expenditure survey.