What is the Consumer Price Index?

Answer:
The Consumer Price Index, or CPI, is

an index compiled by the U.S. Bureau of Labor Statistics. This index looks at consumer prices of common household goods and measures the changes in them each month.

The CPI measures price changes for consumers that represent typical goods and services that urban households consume, including user fees like water and sewer bills as well as sales and excise taxes.

The CPI excludes income tax and investments from the data. The monthly data is collected from 87 urban areas across the country. The Consumer Price Index is used as a measurement of inflation and as an overall economic indicator.

It is commonly used to adjust income payments for those who are covered by collective bargaining agreements or statutory actions, Social Security beneficiaries, and food stamp recipients. The Federal income tax structure also uses the CPI as a guide to prevent an increase in taxes due to inflation.

The CPI is broken down into several sub-indexes including: all urban consumers, urban wage earners and clerical workers, department store inventory price index, and U.S. city average.


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