Producer Price Index Manual: Theory and Practice ... - METAC

10. Treatment of Specific Products
F. Electronic Computers, ISIC
30 4
10.80 The U.S. PPI program developed a computer
price index that has served as a model for
many countries. The methodology of that index is
described below.
10.81 The primary output of the computer industry
is the assembly of components into generalpurpose
computer systems that process data according
to a stored set of instructions. These instructions
are contained in the computer software (operating
and application) and are often included in the computer
system by the manufacturer. Establishments
that primarily manufacture machinery or equipment
that incorporate computers for the purpose of performing
functions such as measuring, displaying. or
controlling process variables are classified based on
the manufactured end product.
10.82 The output of the computer industry can be
disaggregated into several product categories.
These categories should be broadly defined because
the rapid pace of industry technological change can
render narrowly defined categories obsolete. The
PPI publication structure for computers is based on
product detail collected by the U.S. Census Bureau
in their Current Industrial Report (CIR) survey,
which is described below:
• Large-scale;
• Mid-range, excluding Personal Computer (PCs)
and workstations;
• Personal computers and workstations, excluding
portable computers;
• Portable computers with attached displays; and
• Other computers.
10.83 Note that the large-scale and mid-range
product designations are problematic. These two
Census product categories were originally intended
to include computer host or server systems that
were differentiated by memory size. Systems with
64MB or more of memory were considered large
and systems with less than 64 Megabytes (MB)
were considered mid-range. As mentioned above,
any technologically based characteristic used to de-
4 For more information see “Quality-Adjusting Computer
Prices,” Holdway (2001). Located at the BLS website:
www. Stats.bls.gov/ppi/home.htm#publication
fine product categories can quickly be rendered obsolete
by rapid changes in computer output. Because
PPI sample intervals average six to seven
years, if 64MB were maintained as the dividing
point, then the advances in memory and corresponding
fall in price quickly would make the midrange
category obsolete. It would force all computer
servers, including PC servers, into the largescale
category. When the PPI resamples the computer
industry, it will avoid descriptors such as
large-scale or mid-range and use a higher level and
more stable classifications such as host or multiuser
computers. The U.S. Census recently adjusted its
classification of computer servers and describes
them as “Host Computers (multiusers).”
10.84 Rapid changes in computer output can create
the classification problem of new product
classes that do not fit neatly into an existing product
classification structure. For instance, the fastest
growing product segment in the computer industry
are handheld devices such as the Palm Pilot. This
product category did not exist when the PPI completed
its last sample of the computer industry. The
best fit under the current publication structure for
handhelds is portable computers. However, index
users, including producers, have come to view the
portable computer designation as including only
laptops or notebooks. If handheld devices were to
be introduced into the PPI through a targeted sample
augmentation, then the publication structure
should be flexible enough to adapt. User needs and
agency resources bound the degree of flexibility. At
a minimum, the PPI would revise the product title
"portable computers" to "portable computers, including
handhelds." If revising the title of an existing
product classification does not satisfy analytical
requirements, then a more aggressive adaptation
could include the introduction of a new more specific
product category into the publication structure,
such as “Handheld computers, including personal
digital assistants (PDAs).”
10.85 Both of the product classification issues
described above are related to rapid post-sample
changes in output. Similar adjustments at the disaggregate
level may be required for the output of
other high-tech industries such as semiconductors
and telecommunications.
10.86 In the U.S. PPI program, computer producers
were selected with a probability proportionate to
size, and then individual products representing current
output were selected based on their relative
261