A criticism of the CPI is that it takes expenditures from a fixed
market basket of goods at some point in the past and does not reflect changing
trends, buying patterns, and how consumers respond to price changes and new
For many years, the CPI was based on changes in buying habits
dating from 1967. The index is now based on a 1993--1995 market basket, with
references to both 1982--1984 and 1967 periods as a base. Critics argue that
with technological advances alone, the index is not an accurate representation
of American buying habits. For example, cellular telephones were just added
to the 1998 revision of the CPI.
However, in December 1998, BLS announced that it will change
the expenditure weights of items in its consumer price index-fixed market
basket of goods and services every 2 years instead of every decade to reflect
current buying patterns.
Local. Area CPI indexes
are by-products of the national CPI. Since local indexes have smaller sample
sizes than the national index, they are more subject to error. As a result,
local area CPI indexes show more variation than the national index, although
their long-term trends are similar. For this reason, BLS strongly urges users
to consider adopting the national average CPI for use in their escalator clauses.