Inflation and Consumer Spending

Consumer Price Index (CPI)

A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households. The CPI in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services". The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. It is one of several price indices calculated by most national statistical agencies. The annual percentage change in a CPI is used as a measure of inflation. A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices, and for deflating monetary magnitudes to show changes in real values. In most countries, CPI is one of the most closely watched national economic statistics.