Wednesday, September 27, 2000, 12:00 a.m. Pacific

Business Digest Calculating glitch will boost CPI over the past year

WASHINGTON - Consumer-price inflation has been slightly higher over the past year than officially reported because of a calculating glitch at the Bureau of Labor Statistics, government sources said.

The bureau is preparing to revise upward the change over the past year in its Consumer Price Index, the nation's most closely watched measure of inflation and the one used by the government to calculate cost-of-living adjustments in Social Security payments, veterans benefits and federal pensions.

For the 12-month period ended last month, consumer prices rose 3.4 percent - partly as a result of surging energy prices - while the core CPI, which excludes energy and food items, rose 2.5 percent.

The revision, which could be announced before the end of this week, is likely to result in an official inflation rate that is higher by about 0.1 to 0.3 percentage points for the past 12 months, the sources said.

A revision of this magnitude won't please either Federal Reserve officials or investors, because to some extent both have been unhappy with the acceleration this year of both the CPI and the core portion of the index.

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-- Martin Thompson (mthom1927@aol.com), September 28, 2000

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Web posted Thursday, September 28, 2000

Glitch may have understated inflation

WASHINGTON (AP) -- A software glitch caused the government to incorrectly measure inflation at the consumer level this year, possibly understating it a bit, government officials indicated Wednesday.

Private economists said that won't change the rosy picture of the U.S. economy. And, it won't deter the Federal Reserve from leaving interest rates unchanged at its meeting next week, the economists added.

The Labor Department's Bureau of Labor Statistics said Wednesday it will unveil revisions to its Consumer Price Index data for the period of January through August.

Government officials, speaking on condition of anonymity, indicated the revisions will show consumer prices crept up a little bit more than previously thought.

In addition to serving as the government's chief gauge of inflation, the CPI is used to calculate cost-of-living adjustments in Social Security and other federal benefit payments, as well as in some private benefit plans. An upward revision could boost such payments made next year, economists said.

A briefing by the bureau, which puts together the monthly index, is set for Thursday.

''The revisions to the CPI correct an error recently discovered in the software'' used to calculate components of the index that deal with housing costs, the bureau said in a statement.

The Washington Post, citing unidentified sources, reported Wednesday that the revision is likely to result in the CPI being higher by about 0.1 to 0.3 percentage points for the past 12 months. BLS officials wouldn't comment on those numbers.

The bureau's statement indicated the revisions are minor and won't change the overall picture of consumer inflation, which has been tame except for energy-price bursts.

''Although the corrections were large enough to require republication, the general pattern of consumer price behavior this year was little affected.''

For the first eight months of this year, consumer prices were rising at an annual rate of 3.4 percent, compared with a 2.7 percent increase for all of last year. The pickup comes from surging energy prices.

The ''core'' rate of inflation, which excludes volatile energy and food prices, rose during the same period at an annual rate of 2.6 percent, compared with a 1.9 percent rise for all of 1999.

The Federal Reserve has boosted interest rates six times over the last 15 months to slow economy growth and keep inflation from escalating. A spate of economic reports indicate that the Fed's rate increases are working.

Given that, many economists believe the Fed will leave interest rates unchanged not only at their Oct. 3 meeting but for the rest of this year.

Even a moderate upward revision to the CPI of 0.3 percentage points wouldn't change the outlook for monetary policy, economists said.

''I don't think that they would get very excited over the revisions,'' said Sung Won Sohn, chief economist at Wells Fargo. ''The Fed is more concerned about price stability and the revisions would not change their understanding of that. We do have price stability.''

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-- Doris (groomlk@bellsouth.net), September 28, 2000.