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July 2008, Vol. 131, No. 7
Price measures of new vehicles: a comparison
Maria Bustinza, Thaddious Foster, Tod Reese, David Yochum and Daniel Chow
The automobile industry is a vital and dynamic component of the U.S. and global economies. Faced with competition spurred by technological advances and global demand, the industry has attracted significant attention from policymakers, the media, unions, and businesses in the last several years. In the United States, the automobile industry employed more than 1 million workers in 2006.1 U.S. production during this period was 11.4 million units,2 and U.S. consumers purchased 16.5 million cars and trucks. At the same time, foreign manufacturers with factories in the United States have significantly increased their presence in this country.3 In recent years, U.S. automakers have been facing restructuring, financial stresses, and competitive challenges to their traditional market shares. Furthermore, U.S. consumers, exposed to record high gasoline prices, are being offered a growing choice of hybrid-fueled vehicles. As the range of vehicle models, features, and options has grown, consumers have been gaining access to more and better information about these characteristics via the Internet. In this competitive market, price incentives offered by both domestic and foreign automakers to U.S. consumers have become the industry norm.
The automobile industry presents many challenges to anyone trying to measure accurately the average price change of new vehicles. Over the years, the Bureau of Labor Statistics (BLS) has often been asked why its three programs that measure changes in new vehicle prices—the Producer Price Index (PPI), Consumer Price Index (CPI), and International Price Program (IPP)—have often trended differently despite the fact that they measure the same industry.
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1 This study uses the automobile manufacturing industry classifications 3361, 2, and 3 from the North American Industrial Classification System. For employment data in this industry, see Current Employment Statistics, U.S., all employees, on the Internet at http://data.bls.gov/cgi-bin/srgate (visited July 22, 2008). To retrieve the data, type the code CEU3133600101 into the series id(s) box.
2 See www.census.gov/mtis/www/mtis.html (visited June 10, 2008).
3 For the purpose of this article, import vehicles are those that are built outside U.S. borders.
Related BLS programs
Consumer Price Index
Import/Export Price Indexes
Producer Price Indexes
Japanese exchange rates, export restraints, and auto prices.—Feb. 2007.
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