what is the consumer price index cpi 
the consumer price index cpi measures the monthly change in prices paid by u s consumers the bureau of labor statistics bls calculates the cpi as a weighted average of prices for a basket of goods and services representative of aggregate u s consumer spending the cpi is one of the most popular measures of inflation and deflation the cpi report uses a different survey methodology price samples and index weights than the producer price index ppi which measures changes in the prices received by u s producers of goods and services investopedia katie kerpelunderstanding the consumer price index cpi the bls collects about 80 000 prices monthly from some 23 000 retail and service establishments although the two cpi indexes calculated from the data both contain the word urban the more broad based and widely cited of the two covers 93 of the u s population 12shelter category prices accounting for a third of the overall cpi are based on a survey of rental prices for 50 000 housing units which is then used to calculate the rise in rental prices as well as owners equivalents 23the owners equivalent category models the rent equivalent for owner occupied housing to properly reflect housing costs share of consumer spending user fees and sales or excise taxes are included while income taxes and the prices of investments such as stocks bonds or life insurance policies are not part of the cpi 32the calculation of the cpi indexes from the data factors in substitution effects consumers tendency to shift spending away from products and categories has grown relatively more expensive it also adjusts price data for changes in product quality and features the weighting of the product and service categories in the cpi indexes corresponds to recent consumer spending patterns derived from a separate survey 45the cpi u increased 3 3 over the 12 months ending may 2024 before seasonal adjustment the index remained unchanged in may 2024 on a seasonally adjusted basis after increasing 0 3 in april 6types of consumer price indexes cpis the bls publishes two indexes each month the consumer price index for all urban consumers cpi u represents 93 of the u s population not living in remote rural areas it doesn t cover spending by people living in farm households institutions or on military bases cpi u is the basis of the widely reported cpi numbers that matter to financial markets the bls also publishes the consumer price index for urban wage earners and clerical workers cpi w the cpi w covers 29 of the u s population living in households with income derived predominantly from clerical employment or jobs with an hourly wage 2cpi w is used to adjust social security payments as well as other federal benefits and pensions for changes in the cost of living it also shifts federal income tax brackets to ensure taxpayers aren t subjected to a higher marginal rate as a result of inflation 72consumer price index cpi formulasthe more common cpi u calculation entails two primary formulas the first is used to determine the current cost of the weighted average basket of products while the second is used to analyze the year over year change to calculate the annual cpi the bls divides the value of a specific basket of goods today compared to one year ago as noted above the basket of goods and services used in the cpi calculation is a composite of popular items commonly purchased by americans the weight of each component of the basket is in proportion to how they are sold the annual cpi is reported as a whole number and the figure is often greater than 100 assuming current market prices are appreciating then the bls uses the current year s cpi and the prior year s cpi to calculate the inflation rate the inflation rate can be calculated for a given month or annual period in either case the appropriate new and prior period must be selected the inflation rate is reported as a percentage and is often positive assuming current market prices are appreciating investopedia maddy priceconsumer price index cpi categoriesthe monthly cpi release from the bls leads with the change from the prior month for the overall cpi u as well as its key subcategories along with the unadjusted change year over year the bls s detailed tables show price changes for a variety of goods and services organized by eight umbrella spending categories subcategories estimate price changes for everything from tomatoes and salad dressing to auto repairs and sporting events tickets price changes for each subcategory are provided with and without seasonal adjustment 8in addition to the national cpi indexes bls publishes cpi data for u s regions sub regions and major metropolitan areas the metro data is subject to wider fluctuations and is useful mainly for identifying price changes based on local conditions 9the table below represents the cpi basket weighted distribution for food energy and all other items 10