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Facts About the Consumer Price Index (CPI)

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Facts About the Consumer Price Index (CPI) The four surveys used in the Effects of the CPI Facts construction of the CPI The CPI can be used to measure and compare about the Telephone Point-of-Purchase Survey consumers’ purchasing power in different time (TPOPS) — This household survey, conducted periods. As prices increase, the purchasing Consumer by the U.S. Census Bureau for BLS, provides the power of a consumer’s dollar declines, and as sampling frame for the Commodities and Services prices decrease, the consumer’s purchasing Price Index Pricing Survey. Roughly 30,000 households are power increases. (CPI) interviewed each year and asked to identify the The CPI is often used to adjust consumers’ “points” at which they purchase consumer items. income payments. For example, the CPI is This gives BLS a list of grocery stores, department used to adjust Social Security benefits, to adjust stores, doctor’s offices, theaters, internet sites, income eligibility levels for government assistance, shopping malls, etc., currently patronized by urban and to automatically provide cost-of-living wage consumers. adjustments to millions of American workers. Consumer Expenditure Survey (CE) — This household survey, conducted by the U.S. Census The CPI affects more than 100 million persons Bureau for BLS, provides information on the as a result of statutory action: buying habits of American consumers. More than 7,000 families from around the country Over 50 million Social Security beneficiaries provide information each calendar quarter on their About 20 million food stamp recipients in the spending habits in the Quarterly Interview Survey, Supplemental Nutrition Assistance Program and another 7,000 families complete expense diaries (SNAP) in the Diary Survey each year. The data collected from these surveys are used to calculate the relative Around 4.2 million military and Federal importance of items in the market basket. Civil Service retirees and survivors Housing Survey — This survey, conducted by 30 million children who receive lunch BLS, is used to obtain rent prices in each CPI through the National School Lunch Program sampling area. Roughly 50,000 rental units are priced every 6 months. Rent and the estimated (NSLP) rental value of owned homes constitute more than Over 2 million workers covered by collective 30 percent of the total CPI market basket. bargaining agreements that tie wages to Commodities and Services the CPI — This survey, conducted by Pricing Survey BLS, is used to obtain the prices of consumer goods The CPI is used to adjust the Federal income and services in retail establishments (identified tax brackets. These adjustments prevent inflation- by TPOPS) for the market basket items. Each induced increases in tax rates, an effect called month, BLS data collectors visit or call thousands “bracket creep.” of retail stores, service establishments, and other businesses all over the United States to obtain price For further information contact: U.S. Bureau of Labor Statistics information on about 80,000 items. Consumer Price Index www.bls.gov/cpi/ When are CPI data released? Why is the CPI important? The CPI is released every month, usually during The CPI is the most widely used measure the third week of the month. For example, of inflation and is sometimes viewed as an the CPI released the third week in March indicator of the effectiveness of government represents data for February of that year. BLS economic policy. The CPI provides information also releases annual average indexes for the about price change in the Nation’s economy to previous calendar year every January. government, business, labor, and other private What is the market basket citizens, who use the CPI as a guide in making of goods? Are CPI data published only at economic decisions. In addition, the CPI may be used by policy makers as a consideration in The CPI represents all goods and services the national level, or are regional monetary and fiscal policy decisions. The CPI purchased for consumption by the population. level data available, too? and its components also are used to adjust other These expenditure items fit into hundreds of CPI data are available at national, regional, and economic series for price change and to translate subcategories arranged into eight major groups. metropolitan-area levels. BLS publishes the these series into inflation-free dollars. Examples Major groups and examples of categories in national (or U.S. City Average) CPI monthly. of series adjusted by the CPI include retail sales, each are as follows: Indexes based on census regions and three • FOOD AND BEVERAGES hourly wages and earnings, and components of – breakfast major metropolitan areas (Los Angeles, New the National Income and Product Accounts, cereal, milk, coffee, chicken, wine, and full York City, and Chicago) also are published such as the Gross Domestic Product (GDP). service meals and snacks monthly. Further, BLS publishes CPI indexes What is the CPI? • HOUSING – rent of primary residence, for 11 other major metropolitan areas every What do the Consumer Expenditure The Consumer Price Index (CPI) is a measure owners’ equivalent rent, fuel oil, and bedroom other month. (CE) Diary Survey and Quarterly of the average change over time in the prices furniture paid by urban consumers for a market basket Interview Survey provide for • APPAREL – men’s shirts and sweaters, of consumer goods and services. The CPI, women’s dresses, and jewelry the CPI? produced by the Bureau of Labor Statistics • TRANSPORTATION The Consumer Expenditure Diary Survey and (BLS), provides a way to measure the prices – new vehicles, airline Quarterly Interview Survey provide BLS with paid by consumers from month to month. fares, gasoline, and motor vehicle insurance • MEDICAL CARE expenditure data needed to construct the market What does the CPI measure? – prescription drugs basket of goods and services for the CPI. BLS and medical supplies, physicians’ services, then selects goods and services based on this The CPI measures inflation. It is an estimate eyeglasses and eye care, and hospital services data, and the expenditure data are used with the of the average increase (or decrease) in the • RECREATION – televisions, toys, pets and prices collected to calculate the CPI. prices paid by the “average” urban consumer pet products, sports equipment, and admissions in the United States for a representative • EDUCATION AND COMMUNICATION basket of consumer items. The basket includes – food and beverages, housing (including an college tuition, postage, telephone services, and estimated rental value of owned homes), computer software and accessories apparel, transportation, medical care, recreation, • OTHER GOODS AND SERVICES – tobacco education and communication, and other goods and smoking products, haircuts and other and services. personal services, and funeral expenses.
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