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The index is calculated and published monthly by the Bureau of Labor Statistics. The CPI, produced by the Bureau of Labor Statistics (BLS), measures changes in the prices paid by urban consumers (who are over 90% of the population) for a particular group of goods and services. The CPI looks specifically at the prices of apparel, education and communications, food and beverages, housing, medical care, recreation, transportation and other items in over 200 categories. The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. Bankrate.com is an independent, advertising-supported publisher red green refactor and comparison service.
In January 2024, the CPI increased 3.1 percent over the previous 12 months before any seasonal adjustments. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional. Each of those economic scenarios would be characterized as unhealthy because unstable pricing can have ripple effects on other aspects of the economy, like spending and employment. When prices rise too slowly — or if they’re falling on a large scale — it can mean that the economy is weak, with too little demand or too much supply.
By tracking changes in the CPI, policymakers can make informed decisions on how to manage the economy. When wages are adjusted for inflation using the CPI, workers can maintain their purchasing power even as prices rise. Similarly, when interest rates are adjusted for inflation, it can help to prevent economic instability by maintaining the real value of savings and investments. Everything costs more, so manufacturers produce less and may be forced to lay off workers.
- The CPI started to rise above normal levels during the pandemic until it peaked in June 2022 at about 9%.
- The CPI has risen in the post-World War II period, sometimes quickly, sometimes slowly.
- The BLS refers to a variety of sources to calculate CPI, including the prices of goods and services from about 23,000 retail and service establishments throughout the U.S.
- Everything costs more, so manufacturers produce less and may be forced to lay off workers.
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The table below represents the CPI basket weighted distribution for food, energy, and all other items. CPI grew by historically high rates during the late 1970s and early 1980s before slowing in the late 1980s and up until the current decade. Late 2021 through early 2023 was a period of high inflation; the annual rate in 2022 was its highest since the early 1980s. CPI gauges the overall health of the U.S. economy, and it’s the most popular economic indicator that people use to demonstrate how much prices are rising or falling.
What is the Consumer Price Index (CPI) and why is it useful?
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When a new item starts coming up in those diaries and interviews, a data collector working for the BLS goes into a store and picks one of the most popular varieties to enter into the CPI sample. For example, when selecting cheese, the data collector will pick the most often bought cheese in the most often purchased size — say, a 6-ounce package of cheddar. That cheddar will then be tracked at the same grocery store every month to see if its price goes up or down. It means increases in prices at grocery stores, gas stations, and retail shops, making it harder to afford their daily necessities, particularly if wage increases don’t keep up. Trends will also be noted in the CPI report about how the most recent findings compare over time, for both individual indexes and the overall inflation rate. In 1995, the Senate Finance Committee appointed a commission to study CPI’s ability to estimate inflation.
How Is the Consumer Price Index Used?
The CPI is computed based on the spending patterns of households as a whole, and may not accurately reflect the spending patterns of individual households. Consumers use the CPI to understand how inflation affects their purchasing power. By tracking changes in the CPI, consumers can make informed decisions about managing finances.