Consumer Price Index (CPI)
Description: According to the Central Illinois Business Magazine, Consumer Price Index measures the average price changes of goods and services over time, with a reference base of 100.0 in 1982–84. To put this into context, a current CPI of 194.5 means a market basket of goods and services cost $100 in 1982–84 now costs $194.50.
The magazine provides the followind CPI measures from the US Department of Labor for November 2006:
- US City Average
201.5 - Midwest Urban
192.8
Furthermore, According to the U.S. Department of Labor, Bureau of Labor Statistics website:
What is the CPI?
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
How is the CPI used?
The CPI affects nearly all Americans because of the many ways it is used.
Following are major uses:
- As an economic indicator.
- As a deflator of other economic series.
- As a means of adjusting dollar values.
Whose buying habits does the CPI reflect?
The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers.
Is the CPI a cost-of-living index?
The CPI frequently is called a cost-of-living index, but it differs in important ways from a complete cost-of-living measure.
Does the CPI measure my experience with price change?
Not necessarily. It is important to understand that BLS bases the market baskets and pricing procedures for the U and W populations on the experience of the relevant average household, not on any specific family or individual.
How is the CPI market basket determined?
The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought. For the current CPI, this information was collected from the Consumer Expenditure Survey over the two years 2001 and 2002.
What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups.
How are CPI prices collected and reviewed?
Each month, BLS data collectors called economic assistants visit or call thousands of retail stores, service establishments, rental units, and doctors‘ offices, all over the United States to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI.
For more inforamtion on CPI, please see the U.S. Department of Labor, Bureau of Labor Statistics website and for answers to more common questions please view this site.
Source: Central Illinois Business Magazine, January 2007
U.S. Department of Labor, Bureau of Labor Statistics
Date Last Revisited: 3/22/07
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