Consumer Price Index
The Consumer Price Index 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. The Consumer Price Index is used as an
indicator of inflation, a deflator of other economic series, and an escalator for income payments.
The Consumer Price Index reflects spending patterns for each of two population groups, one of which
is the All Urban Consumers (CPI–U). The CPI–U represents about 87 percent of the total U.S. population.
It is based on the expenditures of almost all residents of urban or metropolitan areas, including
professionals, the self–employed, the poor, the unemployed, and retired persons as well as urban
wage earners and clerical workers. Not included in the Consumer Price Index are the spending patterns
of persons living in rural non–metropolitan areas, farm families, persons in the Armed Forces, and those
in institutions, such as prisons and mental hospitals.
The CPI–U has a 1982–84 reference base. That is, the U.S. Bureau of Labor Statistics sets the average
index level (representing the average price level)—for the 36–month period covering the years 1982,
1983, and 1984—equal to 100. Then the U.S. Bureau of Labor Statistics measures changes in relation to
that figure. An index of 110, for example, means there has been a 10 percent increase in price since
the reference period; similarly an index of 90 means a 10 percent decrease. Indexes for different months
are usually compared in relative terms. Thus, an index of 133.5 is 1.063 times higher than an index of
125.6 (133.5/125.6=1.063); in other words, prices increased 6.3 percent.
The index below has not been seasonally adjusted to remove the effect of seasonal influences. Seasonal
influences are those that occur at the same time and in about the same magnitude every year. They include
price movements resulting from changing climatic conditions, production cycles, model changeovers, and holidays.
The Consumer Price Index measures inflation as experienced by consumers in their day–to–day living
expenses. The Consumer Price Index is generally the best measure for adjusting payments to consumers
when the intent is to allow consumers to purchase, at today's prices, a market basket of goods and services
equivalent to one that they could purchase in an earlier period. It is also the best measure to use to
translate retail sales and hourly or weekly earnings into real or inflation–free dollars.
Each month, the media usually focuses on the broadest, most comprehensive Consumer Price Index which
is "The Consumer Price Index for All Urban Consumers (CPI–U) for the U.S. City Average for All Items,