The Consumer Price Index (CPI) is a measure of the average change over time in the price paid by urban households for a set of typical goods and services that people buy and consume, such as food, housing, and medical care.
The U.S. Department of Labor, Bureau of Labor Statistics, produces the CPI to represent a statistical estimate of inflation, which is a general increase in prices and decrease in the purchasing value of money.
- Who experiences poverty?
- How is poverty measured?
- What are poverty thresholds and poverty guidelines?
- What is the consumer price index and how is it used?
- What are good sources of information on basic trends in poverty and related issues?
- What are good sources of demographic and socioeconomic information for states, counties, and cities?
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Whose buying habits are represented by the CPI?
The Bureau of Labor Statistics describes the CPI as reflecting the buying habits of two population groups relative to consumer goods and services: (1) urban or metropolitan-area wage earners and clerical workers; professional, managerial, and technical workers; the self-employed; short-term workers; the unemployed; retirees, and others not in the labor force (CPI-U); and (2) those in hourly wage earning or clerical jobs (CPI-W).
The all-urban group represents over 90 percent of the U.S. population. The CPI-W’s population represents about 30 percent of the total U.S. population, and is a sub-set of the CPI-U.
The CPI for Urban Wage Earners and Clerical Workers (i.e., CPI-W) is a sub-set of the CPI-U population “based on the expenditures of urban households included in the CPI-U definition that also meet two additional 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.”
Source: Consumer Price Index Overview, Bureau of Labor Statistics, 2024.
How is the CPI used?
The CPI is used as an economic gauge; a deflator of other economic series; and to adjust dollar values. Specific examples of CPI uses include the following:
- Relevant to the topic of poverty, the Census Bureau uses the CPI to adjust the official poverty threshold, or minimum income needed to avoid being poor, for inflation each year.
- Employers of the over 2 million workers who are covered by collective bargaining agreements that tie wages to the CPI use the index to adjust their wages.
- The Social Security Administration uses the CPI-W to annually adjust benefits paid to Social Security beneficiaries and Supplemental Security Income (SSI) recipients.
Are there any consumer-related factors the CPI does not cover?
While sometimes referred to as a cost-of-living index, the CPI differs in important ways from a complete index because it does not take into account changes in other factors that affect consumer well-being and are difficult to quantify, such as safety, health, water quality, and crime.
Where can I learn more about the CPI and find related statistics?
See the Bureau of Labor Statistics’ website for detailed information about the CPI, how its various measures are calculated, and to obtain CPI statistics.