United States Consumer Price Index

The U.S. Consumer Price Index (CPI) is a set of consumer price indices calculated by the U.S. Bureau of Labor Statistics (BLS). To be precise, the BLS routinely computes many different CPIs that are used for different purposes. Each is a time series measure of the price of consumer goods and services. The BLS publishes the CPI monthly.

The BLS started the statistic in 1919. It currently computes thousands of consumer price indices, beginning with monthly average prices for each of 8,018 category-area combinations (211 categories of consumption items in 38 urban geographical areas). They also track how much of each of these category area combinations is in the "market basket" consumed by different groups of people. Different published consumer price indices differ in the weights, including the target consumer group and how frequently the weights are updated. The weights for many indices are modified only in January of even-numbered years and are held constant for the next two years. However, weights for the chained CPI (C-CPI-U) are updated each month, so they more accurately track short term shifts in consumption patterns.

The urban wage earner and clerical worker population consists of consumer units consisting of clerical workers, sales workers, craft workers, operative, service workers, or laborers. (Excluded from this population are professional, managerial, and technical workers; the self-employed; short-term workers; the unemployed; and retirees and others not in the labor force.) More than one half of the consumer unit's income has to be earned from the above occupations, and at least one of the members must be employed for 37 weeks or more in an eligible occupation. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is a continuation of the historical index that was introduced after World War I for use in wage negotiation. As new uses were developed for the CPI, the need for a broader and more representative index became apparent. The Social Security Administration uses the CPI-W as the basis for its periodic COLA (Cost Of Living Adjustment).

The all-urban consumer population consists of all urban households in Metropolitan Statistical Areas (MSAs) and in urban places of 2,500 inhabitants or more. Non-farm consumers living in rural areas within MSAs are included, but the index excludes rural consumers and the military and institutional population. The Consumer Price Index for All Urban Consumers (CPI-U) introduced in 1978 is representative of the buying habits of approximately 80 percent of the non-institutional population of the United States, compared with 32 percent represented in the CPI-W. The methodology for producing the index is the same for both populations.

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