Frequently Asked Questions (FAQs)
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. More.
- As a deflator of other economic series. More.
- As a means of adjusting dollar values. More.
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. The all
urban consumer group represents about 89 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 people, as well as urban wage
earners and clerical workers. Not included in the CPI are the spending
patterns of people living in rural nonmetropolitan areas, farm families,
people in the Armed Forces, and those in institutions, such as prisons and
mental hospitals. Consumer inflation for all urban consumers is measured
by two indexes, namely, the Consumer Price Index for All Urban Consumers
(CPI-U) and the Chained Consumer Price Index for All Urban Consumers
(C-CPI-U). ( See the answer to Question 4 for an explanation of the
differences between the CPI-U and C-CPI-U.)
The Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) is based on the expenditures of households included in the CPI-U
definition that also meet two requirements: more than one-half of the
household's income must come from clerical or wage occupations, and at
least one of the household's earners must have been employed for at least
37 weeks during the previous 12 months. The CPI-W population represents
about 28 percent of the total U.S. population and is a subset, or part, of
the CPI-U population.
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. BLS has for some
time used a cost-of-living framework in making practical decisions about
questions that arise in constructing the CPI. A cost-of-living index is a
conceptual measurement goal, however, and not a straightforward
alternative to the CPI. A cost-of-living index would measure changes over
time in the amount that consumers need to spend to reach a certain utility
level or standard of living. Both the CPI and a cost-of-living index would
reflect changes in the prices of goods and services, such as food and
clothing, that are directly purchased in the marketplace; but a complete
cost-of-living index would go beyond this role to also take into account
changes in other governmental or environmental factors that affect
consumers' well-being. It is very difficult to determine the proper
treatment of public goods, such as safety and education, and other broad
concerns, such as health, water quality, and crime, that would constitute
a complete cost-of-living framework. More.
Does the CPI measure my experience with price
Not necessarily. It is important to understand that BLS bases the
market baskets and pricing procedures for the CPI-U and CPI-W populations
on the experience of the relevant average household, not of any specific
family or individual. It is unlikely that your experience will correspond
precisely with either the national indexes or the indexes for specific
cities or regions. More.
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 Surveys for 2013 and 2014. In each of those years,
about 7,000 families from around the country provided information each
quarter on their spending habits in the interview survey. To collect
information on frequently purchased items, such as food and personal care
products, another 7,000 families in each of these years kept diaries
listing everything they bought during a 2-week period.
Over the 2 year period, then, expenditure information came from
approximately 28,000 weekly diaries and 60,000 quarterly interviews used
to determine the importance, or weight, of the more than 200 item
categories in the CPI index structure.
What goods and services does the CPI
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. Major
groups and examples of categories in each are as follows:
- FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine,
full service meals, snacks)
- HOUSING (rent of primary residence, owners' equivalent rent, fuel
oil, bedroom furniture)
- APPAREL (men's shirts and sweaters, women's dresses, jewelry)
- TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle
- MEDICAL CARE (prescription drugs and medical supplies, physicians'
services, eyeglasses and eye care, hospital services)
- RECREATION (televisions, toys, pets and pet products, sports
- EDUCATION AND COMMUNICATION (college tuition, postage, telephone
services, computer software and accessories);
- OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and
other personal services, funeral expenses).
Also included within these major groups are various government-charged
user fees, such as water and sewerage charges, auto registration fees, and
vehicle tolls. In addition, the CPI includes taxes (such as sales and
excise taxes) that are directly associated with the prices of specific
goods and services. However, the CPI excludes taxes (such as income and
Social Security taxes) not directly associated with the purchase of
consumer goods and services.
The CPI does not include investment items, such as stocks, bonds, real
estate, and life insurance. (These items relate to savings and not to
day-to-day consumption expenses.)
For each of the more than 200 item categories, using scientific
statistical procedures, the Bureau has chosen samples of several hundred
specific items within selected business establishments frequented by
consumers to represent the thousands of varieties available in the
marketplace. For example, in a given supermarket, the Bureau may choose a
plastic bag of golden delicious apples, U.S. extra fancy grade, weighing
4.4 pounds to represent the Apples category.
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. These economic assistants record the prices of about 80,000
items each month, representing a scientifically selected sample of the
prices paid by consumers for goods and services purchased.
During each call or visit, the economic assistant collects price data
on a specific good or service that was precisely defined during an earlier
visit. If the selected item is available, the economic assistant records
its price. If the selected item is no longer available, or if there have
been changes in the quality or quantity (for example, eggs sold in
packages of ten when they previously were sold by the dozen) of the good
or service since the last time prices were collected, the economic
assistant selects a new item or records the quality change in the current
The recorded information is sent to the national office of BLS, where
commodity specialists who have detailed knowledge about the particular
goods or services priced review the data. These specialists check the data
for accuracy and consistency and make any necessary corrections or
adjustments, which can range from an adjustment for a change in the size
or quantity of a packaged item to more complex adjustments based upon
statistical analysis of the value of an item's features or quality. Thus,
commodity specialists strive to prevent changes in the quality of items
from affecting the CPI's measurement of price change.
How is the CPI calculated?
The CPI is a product of a series of interrelated samples. First, using
data from the 1990 Census of Population, BLS selected the urban areas from
which data on prices were collected and chose the housing units within
each area that were eligible for use in the shelter component of the CPI.
The Census of Population also provided data on the number of consumers
represented by each area selected as a CPI price collection area. Next,
another sample (of about 14,500 families each year) served as the basis
for a Point-of-Purchase Survey that identified the places where households
purchased various types of goods and services. More.
How are taxes treated in the CPI?
Certain taxes are included in the CPI, namely, taxes that are directly
associated with the purchase of specific goods and services (such as sales
and excise taxes). Government user fees are also included in the CPI. For
example, toll charges and parking fees are included in the transportation
category, and an entry fee to a national park would be included as part of
the admissions index. In addition, property taxes should be reflected
indirectly in the BLS method of measuring the cost of the flow of services
provided by shelter, which we called owners' equivalent rent, to the
extent that these taxes influence rental values. Taxes not directly
associated with specific purchases, such as income and Social Security
taxes, are excluded, as are the government services paid for through those
For certain purposes, one might want to define price indexes to
include, rather than exclude, income taxes. Such indexes would provide an
answer to a question different from the one to which the present CPI is
relevant, and would be appropriate for different uses.
How do I read or interpret an index?
An index is a tool that simplifies the measurement of movements in a
numerical series. Most of the specific CPI indexes have a 1982-84
reference base. That is, BLS 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. BLS then 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. Movements of the index from one date to
another can be expressed as changes in index points (simply, the
difference between index levels), but it is more useful to express the
movements as percent changes. This is because index points are affected by
the level of the index in relation to its reference period, while percent
changes are not.
In the table that follows, Item A increased by half as many index
points as Item B between Year I and Year II. Yet, because of different
starting indexes, both items had the same percent change; that is, prices
advanced at the same rate. By contrast, Items B and C show the same change
in index points, but the percent change is greater for Item C because of
its lower starting index value.
|Change in index points
||9.0/112.500 x 100 = 8.0
||18.0/225.000 x 100 = 8.0
||18.0/110.000 x 100 =
Is the CPI the best measure of inflation?
Inflation has been defined as a process of continuously rising prices
or equivalently, of a continuously falling value of money.
Various indexes have been devised to measure different aspects of
inflation. The CPI measures inflation as experienced by consumers in their
day-to-day living expenses; the Producer Price Index (PPI) measures
inflation at earlier stages of the production process; the Employment Cost
Index (ECI) measures it in the labor market; the BLS International Price
Program measures it for imports and exports; and the Gross Domestic
Product Deflator (GDP Deflator) measures inflation experienced by both
consumers themselves as well as governments and other institutions
providing goods and services to consumers. Finally, there are specialized
measures, such as measures of interest rates.
The "best" measure of inflation for a given application depends on the
intended use of the data. The CPI 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.
Which index is the "Official CPI" reported in
Our broadest and most comprehensive CPI is called the All Items
Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City
Average, 1982-84 = 100.
In addition to the All Items CPI, BLS publishes thousands of other
consumer price indexes. One such index is called "All items less food and
energy". Some users of CPI data use this index because food and energy
prices are relatively volatile, and these users want to focus on what they
perceive to be the "core" or "underlying" rate of inflation.
Again, while we publish many indexes, our broadest measure of inflation
includes all items consumers purchase, including food and energy. In
addition, when CPI data are reported, these data can be reported on a not
seasonally adjusted basis as well as a seasonally adjusted basis. Often,
the media will report some, or all, of the following:
- Index level, not seasonally adjusted. (for example, May 2008 =
- 12-month percent change, not seasonally adjusted. (for example, May
2007 to May 2008 = 4.2 percent).
- 1-month percent change on a seasonally adjusted basis. (for example,
from April 2008 to May 2008 = 0.6 percent).
- Annual rate of percent change so far this year (for example, from
December 2007 to May 2008 if the rate of increase over the first 5
months of the year continued for the full year, after the removal of
seasonal influences, the rise would be 4.0 percent).
- annual rate based on the latest seasonally adjusted 1-month change.
For example, if the rate from April 2008 to May 2008 continued for a
full 12 months, then the rise, compounded, would be 8.1 percent.
What index should I use for escalation?
The decision to employ an escalation mechanism, as well as the choice
of the most suitable index, is up to the user. When the terms of an
escalation contract are drafted, both legal and statistical questions can
arise. While BLS cannot help in any matters relating to legal questions,
it does provide basic technical and statistical assistance to users who
are developing indexing procedures. More.
I am writing an escalation contract tied to
annual changes in the CPI. Should I specify a particular monthly index
from one year to the next (e.g., December-to-December)? Or should I use
CPI annual average indexes?
There is no right or wrong answer to your question. That said, when an
escalation contract is tied to the CPI, the index to be used should be
spelled out clearly in the contract to avoid potential conflicts, as the
Bureau of Labor Statistics cannot mediate disputes which might arise
between the parties to an escalation agreement. More information on how to
use the CPI in escalation contracts can be found at http://stats.bls.gov/cpi/cpi1998d.htm.
From a statistical perspective, each of these types of indexes has its
advantages. A 12-month percent change from, say, December-to-December, is
arguably a more recent estimate of price change than an annual average
percent change. Said another way, the December-to-December percent change
is the most recent 12-month percent change in a year, while the annual
average percent change reflects the change in the average index for all 12
months of one year to the average index for all 12 months the next year.
The December-to-December index percent change, however, tends to be
more volatile than the percent change in the annual average index. Annual
average indexes are based on 12 monthly data points which, when averaged,
reduce volatility by smoothing out the highs and lows. These two types of
calculations are explored in greater detail in the report, "Math
Calculations..." at http://stats.bls.gov/cpi/cpimathfs.pdf.
To illustrate the differences that can arise between the two methods of
calculation, take the situation which occurred in 2008 when the percent
changes varied widely between these two approaches, largely as a result of
the fluctuating cost of gasoline. The U.S City Average All items index
increased just 0.1 percent from December 2007 to December 2008; only five
months earlier (from July 2007 to July 2008) this index had risen 5.8
percent. Annual average percent changes for the last few years during this
period, on the other hand, have been in a much narrower range.
When should I use seasonally adjusted
By using seasonally adjusted data, some users find it easier to see the
underlying trend in short-term price changes. It is often difficult to
tell from raw (unadjusted) statistics whether developments between any 2
months reflect changing economic conditions or only normal seasonal
patterns. Therefore, many economic series, including the CPI, are adjusted
to remove the effect of seasonal influences-those which occur at the same
time and in about the same magnitude every year. Among these influences
are price movements resulting from changing weather conditions, production
cycles, changeovers of models, and holidays.
BLS annually reestimates the factors that are used to seasonally adjust
CPI data. Seasonally adjusted indexes that have been published earlier are
subject to revision for up to 5 years after their original release.
Therefore, unadjusted data are more appropriate for escalation
What area indexes are published and how
Besides monthly publication of the national (or U.S. City Average)
CPI-U, C-CPI-U, and CPI-W, indexes are published by area for the CPI-U and
CPI-W. For the C-CPI-U, data for all items and 27 components are available
at the national level only; for the CPI-U and CPI-W, 377 component series
are published at the national level. Monthly CPI-U and CPI-W indexes are
published for the four census regions: Northeast, Midwest (formerly North
Central), South, and West. Monthly indexes also are published for urban
areas classified by population size: all metropolitan areas over 1.5
million, metropolitan areas smaller than 1.5 million, and all
nonmetropolitan urban areas. Indexes are available as well within each
region, cross-classified by area population size. For the Northeast and
West, however, indexes for nonmetropolitan areas are not available. BLS
also publishes indexes for 27 local areas. These indexes are byproducts of
the national CPI program. Each local index has a much smaller sample size
than the national or regional indexes and is, therefore, subject to
substantially more sampling and other measurement error. As a result,
local-area indexes are more volatile than the national or regional
indexes, and BLS strongly urges users to consider adopting the national or
regional CPIs for use in escalator clauses. Used with caution, local-area
CPI data can illustrate and explain the impact of local economic
conditions on consumers' experience with price change. Local-area data are
available on the schedule shown below.
BLS publishes three major metropolitan areas monthly:
- Chicago-Gary-Kenosha, IL-IN-WI
- Los Angeles-Riverside-Orange County, CA
- New York-Northern NJ-Long Island, NY-NJ-CT-PA
Data for the following additional 11 metropolitan areas are published
every other month [on an odd (January, March, etc.) or even (February,
April, etc.) month schedule] for the following areas:
- Atlanta, GA (even)
- Boston-Brockton-Nashua, MA-NH-ME-CT (odd)
- Cleveland-Akron, OH (odd)
- Dallas-Fort Worth, TX (odd)
- Detroit-Ann Arbor-Flint, MI (even)
- Houston-Galveston-Brazoria, TX (even)
- Miami-Fort Lauderdale, FL (even)
- Philadelphia-Wilmington-Atlantic City, PA-NJ-DE-MD (even)
- San Francisco-Oakland-San Jose, CA (even)
- Seattle-Tacoma-Bremerton, WA (even)
- Washington-Baltimore, DC-MD-VA-WV (odd)
(Note: The designation even or odd refers to the
month during which the area's price change is measured. Because of the
time needed for processing, data are released 2 to 3 weeks into the
Data are published for another group of 13 metropolitan areas on a semiannual basis. These indexes, which refer to the arithmetic average for the 6-month periods from January through June and July through December, are published with the release of the CPI for June and December, respectively, in July and January for the following areas:
- Anchorage, AK
- Cincinnati-Hamilton, OH-KY-IN
- Denver-Boulder-Greeley, CO
- Honolulu, HI
- Kansas City, MO-KS
- Milwaukee-Racine, WI
- Minneapolis-St, Paul, MN-WI
- Phoenix-Mesa, AZ
- Pittsburgh, PA
- Portland-Salem, OR-WA
- St. Louis, MO-IL
- San Diego, CA
- Tampa-St. Petersburg-Clearwater, FL
What area CPI should I use if there is no CPI
for the area I live in?
Although the BLS can provide some guidance on this question, users must
make the final decision.
As noted in the answers to Questions 14 and 17, BLS strongly urges the
use of the national or regional CPIs for use in escalator clauses. These
indexes are more stable and subject to less sampling and other measurement
error than are area indexes and, therefore, are more statistically
Can the CPIs for individual areas be used to
compare living costs among the areas?
No, an individual area index measures how much prices have changed over
a specific period in that particular area; it does not show whether prices
or living costs are higher or lower in that area relative to another. In
general, the composition of the market basket and the relative prices of
goods and services in the market basket during the expenditure base period
vary substantially across areas. More.
What types of data are published?
Many types of data are published as outputs from the CPI program. The
most popular are indexes and percent changes. Requested less often are
relative importance (or relative expenditure weight) data, base conversion
factors (to convert from one CPI reference period to another), seasonal
factors (the monthly factors used to convert unadjusted indexes into
seasonally adjusted indexes), and average food and energy prices. Index
and price change data are available for the U.S. city average (or national
average), for various geographic areas (regions and metropolitan areas),
for national population-size classes of urban areas, and for
cross-classifications of regions and size classes. Indexes for various
groupings of items are available for all geographic areas and size
Individual indexes are available for more than 200 items (for example,
apples, men's shirts, and airline fares), and more than 120 different
combinations of items (for example, fruits and vegetables, food at home,
food and beverages, and "All Items"), at the national (U.S. city average)
level. A few indexes are available from as far back as 1913.
Each month, indexes are published along with short-term percent
changes, the latest 12-month change, and, at the national item and group
level, unadjusted and (where appropriate) seasonally adjusted percent
changes (and seasonal factors), together with annualized rates of change.
The annualized rates indicate what the rate of change would be for a
12-month period, if a price change measured for a shorter period continued
for a full 12 months.
The answer to question 16 provides information about the areas and size classes for which indexes
are published. For areas, BLS publishes less detailed groupings of items
than it does for the national level. The following lists illustrate this
|U.S. City Average
- Food and beverages
- Food at home
- Cereals and bakery products
- Cereals and cereal products
- Flour and prepared flour mixes
- Breakfast cereal
- Rice, pasta, and corn meal
- Bakery products
- Fresh biscuits, rolls, muffins
- Cakes, cupcakes, and cookies
- Fresh cakes and cupcakes
- Other bakery products
- Fresh sweet rolls, coffeecakes, and doughnuts
- Crackers, bread, and cracker products
- Frozen and refrigerated bakery products, pies,
Annual average indexes and percent changes for these groupings are
published at the national and local levels.
Semiannual average indexes and percent changes for some of these
groupings are also published.
Each month, BLS publishes average price data for some food items (for
the United States and four regions) and for some energy items (for the
United States, four regions, three size classes, 10 cross-classifications
of regions and size classes, and 14 metropolitan areas).
What are some limitations of the CPI?
The CPI is subject to both limitations in application and limitations
Limitations of application
The CPI may not be applicable to all population groups. For example,
the CPI-U is designed to measure inflation for the U.S. urban population
and thus may not accurately reflect the experience of people living in
rural areas. Also, the CPI does not produce official estimates for the
rate of inflation experienced by subgroups of the population, such as the
elderly or the poor. (BLS does produce and release an experimental index
for the elderly population; however, because of the significant
limitations of this experimental index, it should be interpreted with
As noted in the answer to question 19,
the CPI cannot be used to measure differences in price levels or living
costs between one place and another; it measures only time-to-time changes
in each place. A higher index for one area does not necessarily mean that
prices are higher there than in another area with a lower index. It merely
means that prices have risen faster in the area with the higher index
since the two areas' common reference period.
The CPI cannot be used as a measure of total change in living costs
because changes in these costs are affected by factors (such as social and
environmental changes and changes in income taxes) that are beyond the
definitional scope of the index and so are excluded.
Limitations in measurement
Limitations in measurement can be grouped into two basic types,
sampling errors and non-sampling errors.
Sampling errors. Because the CPI measures price
changes based on a sample of items, the published indexes differ somewhat
from what the results would be if actual records of all retail purchases
by everyone in the index population could be used to compile the index.
These estimating or sampling errors are limitations on the accuracy of the
index, not mistakes in calculating the index. The CPI program has
developed measurements of sampling error, which are updated and published
annually on the CPI home page. The CPI sample design allocates the sample
in a way that maximizes the accuracy of the index, given the funds
Non sampling errors. These errors occur from a variety
of sources. Unlike sampling errors, they can cause persistent bias in
measurements of the index. Nonsampling errors are caused by problems of
price data collection, logistical lags in conducting surveys, difficulties
in defining basic concepts and their operational implementation, and
difficulties in handling the problems of quality change. Nonsampling
errors can be far more hazardous to the accuracy of a price index than
sampling errors. Hence, BLS expends much effort to minimize these errors.
Highly trained personnel ensure the comparability of quality of items from
period to period (see answer to
question 8); collection procedures are extensively documented, and
recurring audits are conducted. The CPI program has an ongoing research
and evaluation program in order to identify and implement improvements in
Will the CPI be updated or revised in the
Yes. The CPI will need revisions as long as there are significant
changes in consumer buying habits or shifts in population distribution or
demographics. By developing annual Consumer Expenditure Surveys and
Point-of-Purchase Surveys, the Bureau has the flexibility to monitor
changing buying habits in a timely and cost-efficient manner. In addition,
the census conducted every 10 years by the Census Bureau provides
information that enables the Bureau of Labor Statistics to reselect a new
geographic sample that accurately reflects the current population
distribution and other demographic factors
As a matter of policy, BLS is continually researching improved
statistical methods. Thus, even between major revisions, improvements to
the CPI are made.
How can I get information on the CPI?
Information on the CPI is available from BLS electronically and through
subscriptions to publications. Information specialists are also available in the
national and regional offices to provide assistance via telephone or email.
BLS on the Internet. BLS provides free access to published CPI data
and press releases. The most recent month's CPI is made available on the
CPI homepage immediately
after its release. CPI press releases for metropolitan
areas can be accessed from the regional
office homepages. In addition, current
and historical data are available from a searchable database.
The CPI homepage also provides information on methodology, frequently asked questions, and explanations
of how the CPI handles special items, such as medical care and housing.
E-mail subscription service. The latest U.S. average and local
Consumer Price Indexes can be delivered directly to a subscriber's e-mail
address the morning they are released. You can subscribe to one of the
national and regional CPI subscriptions offered on the BLS News Service. The national CPI release is located in the
"News Releases" section and the regional CPI updates are located in the "Notifications"
Recorded CPI data. Recorded summaries of CPI data may be obtained by
calling any one of the following metropolitan area CPI hotlines. Summaries typically include data for the U.S. City Average, as well as
the specified area. Recordings are approximately 3 minutes in length and
are available 24 hours a day, 7 days a week.
Information Specialists. Personal assistance via telephone or email is available during normal
Additional information may be obtained from the Office of Prices
and Living Conditions, Bureau of Labor Statistics, 2 Massachusetts Avenue,
N.E., Room 3615, Washington, DC, 20212-0001.
Last Modified Date: December 21, 2016