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QUESTION:  Is the Consumables category based on a basket of goods?

 

The Geographic Assessor databases establish the Base City spending pattern according to a North American norm for the earnings level specified.  The spending pattern is calculated in this order:  housing, then taxes, then remaining spendable income distributed to remaining categories.  The program then answers the question: What will it cost to buy the same amount of goods and services in the Base City as at this North American norm?  A "consumables" differential for the Base City is applied to the norm to generate the Base City consumables expenditures.  

 

The regression equations utilized by the Geographic Assessor are based upon both "basket of goods" studies and other analyses of consumables differentials.  Expenditure figures for Consumables are built up from a market basket of goods and services that a typical management/professional household would purchase and consume. The market basket of goods and services uses survey data from items that represent categories of goods and services (i.e., proxy goods). For example, ground beef could be the item that represents red meat in the market basket. The assumption is that, if the price of a specific amount of ground beef is 15% above the National Average, then the price of all red meat is approximately 15% above the National Average. The National Average is the average for that item during that sampling period only. Each item contributes a specific share (weight) to the market basket. Studies conducted by the Bureau of Labor Statistics’ Consumer Expenditure Survey are used by ERI researchers to determine the weights assigned in the Geographic Assessor model. The specific weights allocated to each component of the Consumables portion defines a management/professional standard of living. Consumables prices are surveyed only from grocery and retail stores where management/professional households would normally shop. Similarly, only establishments in which management/professional households typically purchase services are surveyed.

 

The following categories of goods and services are collected for use in the Consumables price index modeling: meats, dairy products, produce, bakery products, miscellaneous grocery products, miscellaneous goods and services (fast food, average casual restaurant, haircut and other personal services, clothing items, entertainment, major appliance repair, etc.).

 

ERI uses numerous, large relational databases and modeling techniques to collect, aggregate, and store pricing data.  The specific prices of individual proxy goods and services are not available in a format that is meaningful to our subscribers.

 

It is prohibitively expensive to collect price data in every one of the over 9,000 locations in the ERI database.  ERI researchers have developed a theoretical econometric model that identifies important determinants of the cost of living in a specific location. This algorithm is used to estimate prices in locations where survey data is not collected.

 

As housing and tax prices change from release to release, the overall spending pattern in the remaining categories will change also. Please note that this is a different cost-of-living methodology than the CPI type methodology which tracks the prices of the same basket of goods over time.

 

Please note: All state and local sales tax estimates, Canadian Goods and Services Tax (GST), Harmonized Sales Tax (HST), and Provincial Sales Tax (PST) estimates, and Value Added Tax (VAT) estimates are included in the Consumables estimates.

 

See Two City Comparison - Background for more information.