How does the CPI account for changes in housing and household services costs?

The Consumer Price Index (CPI) accounts for changes in housing and household services costs through a combination of data collection and calculation methods.

To measure changes in housing costs, the CPI considers both rental and owner-occupied housing. For rental housing, the Bureau of Labor Statistics (BLS) collects data on rents paid by consumers through surveys and other sources. These rental prices are then used to calculate the rent component of the CPI.

For owner-occupied housing, the CPI uses a concept called "owners' equivalent rent" (OER). OER represents the amount of rent that homeowners would have to pay if they were renting their homes. The BLS collects data on rental prices and other factors related to housing costs, such as property taxes and insurance, to estimate OER. This estimation is based on the assumption that homeowners are essentially renting their homes to themselves.

In addition to housing costs, the CPI also accounts for changes in household services costs. This includes expenses related to domestic services such as housekeeping, gardening, and maintenance. The BLS collects data on the prices of these services through surveys and other sources, and these prices are then incorporated into the CPI calculation.

Overall, the CPI uses a comprehensive approach to account for changes in housing and household services costs by collecting data on rental prices, estimating owners' equivalent rent, and considering the prices of various household services. This allows the index to reflect the changing costs of these essential components of consumer expenditures.