Subbed data source, lower inflation estimate

For the New York Times, Ben Casselman reports on a previously undisclosed change in data source by the Bureau of Economic Analysis, which led to an inflation estimate that was lower than expected.

Data on legal services usually comes from the consumer index. But the Bureau of Labor Statistics, which has struggled with budget cuts and staff attrition, hasn’t been able to collect enough data in recent years to publish the legal services index consistently. It has continued to provide the data to the Bureau of Economic Analysis, but the monthly readings have been volatile.

In January, the C.P.I. for legal services jumped more than 11 percent, according to analyses of data from the Bureau of Labor Statistics conducted by private-sector forecasters.

As a result, the Bureau of Economic Analysis decided to base its estimate of legal prices in January on the producer price data, which has been less volatile. Mr. Davis said that the jump in legal services prices in the C.P.I. data — and the absence of a clear reason for such a big increase — made that the right decision.

The challenge with comparing data over time is that methodology needs to stay the same or at least get a footnote so that analysts can adjust. The BEA responded that this was not a methodology change and just a substitute for volatile data, which seems convenient given the current state of government data.