Consumer Price Index (CPI): Measuring Changes in Prices

What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a basket of goods and services.

How is CPI Calculated?

The CPI is calculated by the Bureau of Labor Statistics (BLS) based on surveys of prices from thousands of retail and service establishments across the country. These prices are then combined into a single index.

What Does CPI Measure?

The CPI measures a wide range of items, including:

• Food and beverages
• Housing
• Transportation
• Medical care
• Education
• Recreation

How to Use CPI

Monitoring Inflation

The CPI is a key indicator of inflation. When the CPI rises, it means that the cost of living is increasing.

Setting Wages and Benefits

The CPI is used by businesses and governments to set wages and benefits.

Making Economic Decisions

Economists and policymakers use the CPI to make decisions about monetary and fiscal policy.

Recent CPI Trends

In June 2023, the CPI for All Urban Consumers increased 30 percent from June 2022.

However, core CPI inflation, which excludes food and energy prices, is now running at its slowest pace since April 2021.

Conclusion

The Consumer Price Index (CPI) is a valuable tool for measuring changes in prices and making informed economic decisions.