A long literature has focused on the discrepancy between the CE and PCE data from the National Income and Product Accounts (NIPA) (Attanasio, Battistin, and Leicester, 2006; Branch, 1994; Garner, McClelland, and Passero, 2009; Garner et al., 2006; Gieseman, 1987; Meyer and Sullivan, 2011; Slesnick, 1992). However, in comparing the CE to the PCE data, it is important to recognize conceptual incompatibilities between these data sources. Slesnick (1992, p. 22), when comparing CE and PCE data from 1960 through 1989, concluded that “approximately one-half of the difference between aggregate expenditures reported in the CEX [CE] surveys and the NIPA can be accounted for through definitional differences.” Similarly, the General Accounting Office (1996, p. 15), now the U.S. Government Accountability Office, in a summary of a Bureau of Economic Analysis comparison of the differences in 1992, reported that “more than half was traceable to definitional differences.”
Thus, a key conceptual difference between the CE and PCE is “what is measured.” The CE measures out-of-pocket spending by households, while the PCE definition is wider, including purchases made on behalf of households by institutions. The CE is not intended to capture purchases by households abroad such as those on military bases, whereas the PCE includes these purchases. These differences are important and growing over time. Imputations including those for owner-occupied housing and financial services, but excluding purchases by nonprofit institutions serving households and employer contributions for group health insurance, now account for over 10 percent of the PCE. In-kind social benefits account for nearly another 10 percent. Employer contributions for group health insurance and workers’ compensation account for over 6 percent, while life insurance and pension fund expenses and final consumption expenditures of nonprofits represent almost 4 percent. McCully (2011) reported that in 2009 nearly 30 percent of the PCE was out-of-scope for the CE, up from just over 7 percent in 1959.
Another important conceptual difference between the CE and PCE is the underlying data and how the estimates are constructed. Chapter 3 of this report describes the CE surveys in some detail. In comparison, the PCE aggregates come from data on the production of goods and services, rather than consumption or expenditures by households. The PCE depends on multiple sources, primarily from business records reported on the economic censuses and other Census Bureau surveys. The PCE numbers are the product of substantial estimation and imputation processes that have their own error profiles. Estimates from these business surveys are adjusted using input-output tables to add imports and subtract sales that do not go