# Title 5

## SECTION 591.222

### 591.222 How does OPM use the expenditure weights to combine price indexes

§ 591.222 How does OPM use the expenditure weights to combine price indexes?OPM uses a three-step process to combine price indexes.

(a) *Step 1.* For each DEC represented by one or more items
for which OPM could make valid price comparisons (e.g., OPM was
able to collect representative prices in both the COLA and DC
areas), OPM computes the unweighted geometric average (the
*nth* root of the product of *n* numbers) of the price
index(es) of all item(s) representing the DEC.

(b) *Step 2.* OPM multiplies the price index for each DEC
by its expenditure weight, sums the cross products, and divides by
the sum of the weights used in the calculation. This produces a
price index for the level of aggregation (e.g., PEG or sub-PEG) in
which the DEC is categorized.

(c) *Step 3.* OPM repeats the process described in Step 2
at each level of aggregation within the PEG to produce a price
index for the PEG, at the PEG level to produce an index for the
MEG, and at the MEG level to produce the overall price index for
the COLA area.