the consumer price index to the "chain-type price index for personal consumption expenditures". Comparison to CPI The differences between the two indexes can be grouped into four categories: formula effect, weight effect, scope effect, and "other effects". The formula effect accounts for the different formulas used to calculate the two indexes. The PCE price index is based on the Fisher-Ideal formula, while the CPI is based on a modified Laspeyres formula. The weight effect accounts for the relative importance of the underlying commodities reflected in the construction of the two indexes. The scope effect accounts for conceptual differences between the two indexes. PCE measures spending by and on behalf of the personal sector, which includes both households and nonprofit institutions serving households; the CPI measures out-of-pocket spending by households. The "net" scope effect adjusts for CPI items out-of-scope of the PCE price index less items in the PCE price index that are out-of-scope of the CPI. "Other effects" include seasonal adjustment differences, price differences, and residual differences. - See more at: https://www.bea.gov/help/faq/555 The above chart is illustrative but may not reflect current values. The comparisons in the table above will vary over time as the relative weights of the components of the indexes change. The CPI base price and weightings are adjusted every two years. The above table illustrates two commonly discussed important differences between the PCE deflator and CPI-U. The first is the relative importance of housing, which is due in part to the difference in scope mentioned above. CPI contains a large component of owner-equivalent rent, which by definition is an imputed value and not a real direct expenditure. The second major difference in weight is healthcare. This again stems from the definition of the index and the surveys used. CPI measures only the out-of-pocket healthcare costs of households where PCE includes healthcare purchased on behalf of households by third parties, including employer-provided health insurance. In the United States, employer health insurance is a large component and accounts for much of the difference in weights. Another notable difference is that prices and weightings of the CPI are based on household surveys, while those of the PCE are based on business surveys. One reason for the difference in formulas is that not all the data needed for the Fisher-Ideal formula is available monthly even though it is considered superior. CPI is a practical alternative used to give a quicker