CPI (Consumer Price Index) is a commonly used measure of inflation in the United States. It measures the average change in prices of consumer goods and services purchased by households.
CPI data is released monthly by the Bureau of Labor Statistics in the United States.
The Consumer Price Index for All Urban Consumers (CPI-U) rose 9.1 per cent over the previous 12 months to 296.311, the highest 12-month increase since November 1981. Seasonally unadjusted, the index rose by 1.4 per cent in June.
The all-items index, which excludes food and energy, rose 5.9 per cent over the last 12 months.
The energy index rose 41.6 per cent in the past year, the highest increase since April 1980.
Food rose 10.4 per cent in the last year, the highest increase since February 1981.
Data source: U.S. BUREAU OF LABOR STATISTICS
How is CPI calculated?
The Bureau of Labor Statistics monitors 94,000 prices monthly to determine the CPI, which weights each item’s index based on its contribution to recent consumer spending to determine overall price changes.
The CPI also considers the substitution effect, in which consumers switch to less costly alternatives as prices rise relative to other items.
Seasonal adjustments are provided as well as the unadjusted numbers.
Divide the cost of the market basket in the year by the cost of the same market basket in the base year (1984) to calculate CPI for any year.
How is the CPI used?
Policymakers and financial markets closely watch the Consumer Price Index (CPI) as an inflation indicator. Cost-of-living adjustments for federal benefit payments are calculated using a CPI index.
What happens when CPI increases?
An upward change in the CPI indicates that the average price level over time has increased. This, in turn, results in adjustments to the cost of living and income, known as indexation.