Consumer Price Indexes (CPI)

The CPI is a measure of the average change in prices over time in a fixed "market basket" of goods and services purchased either by urban wage earners and clerical workers or by all urban consumers.

In 1919, the Bureau of Labor Statistics (BLS) began to publish complete indexes at semiannual intervals, using a weighting structure based on data collected in the expenditure survey of wage-earner and clerical-worker families in 1917-19 (BLS Bulletin 357, 1924). The first major revision of the CPI occurred in 1940, with subsequent revisions in 1953, 1964, 1978, and 1987.

Beginning with the release of data for January 1988 in February 1988, most Consumer Price Indexes shifted to a new reference base year. All indexes previously expressed on a base of 1967=100, or any other base through December 1981, have been re-based to 1982-84=100. Selection of the 1982-84 period was made to coincide with the updated expenditure weights, which are based upon data tabulated from the Consumer Expenditure Surveys for 1982, 1983, and 1984.

BLS publishes CPIs for two population groups: (1) a CPI for All Urban Consumers (CPI-U) which covers approximately 80 percent of the total population; and (2) a CPI for Urban Wage Earners and Clerical Workers (CPI-W) which covers 32 percent of the total population. The CPI-U includes, in addition to wage earners and clerical workers, groups which historically have been excluded from CPI coverage, such as professional, managerial, and technical workers, the self-employed All civilians 16 years old and over who were either (1) "at work" those who did any work at all during the reference week as paid employees, worked in their own business or profession, worked on their own farm, or worked 15 hours or more as unpaid workers on a family farm or in a family business; or (2) were "with a job but not at work" those who did not work during the reference week but had jobs or businesses from which they were temporarily absent due to illness, bad weather, industrial dispute, vacation, or other personal reasons. Excluded from the employed are persons whose only activity consisted of work around the house or unpaid volunteer work for religious, charitable, and similar organizations; also excluded are persons on active duty in the United States Armed Forces., short-term workers, the unemployed, retirees and others not in the labor force All persons classified in the civilian labor force plus members of the U.S. Armed Forces (persons on active duty with the United States Army, Air Force, Navy, Marine Corps, or Coast Guard)..

The current CPI is based on prices of food, clothing, shelter, fuels, transportation fares, charges for doctors and dentists services, drugs, etc., purchased for day-to-day living. Prices are collected in 85 areas across the country from over 57,000 housing units and 19,000 establishments. Area selection was based on the 1980 census. All taxes directly associated with the purchase and use of items are included in the index. Prices of food, fuels, and a few other items are obtained every month in all 85 locations. Prices of most other commodities and services are collected monthly in the five largest geographic areas and every other month in other areas.

In calculating the index, each item is assigned a weight to account for its relative importance in consumers budgets. Price changes for the various items in each location are then averaged. Local data are then combined to obtain a U.S. city average. Separate indexes are also published for regions, area size-classes, cross-classifications of regions and size-classes, and for 29 local areas, usually consisting of the Metropolitan Statistical Area (MSA); see Appendix II. Area definitions are those established by the Office of Management and Budget in 1983. Definitions do not include revisions made since 1983. Area indexes do not measure differences in the level of prices among cities; they only measure the average change in prices for each area since the base period. For further details regarding the CPI, see the BLS Handbook of Methods, Bulletin 2414, Chapter 19; the Consumer Price Index, and Report 736, the CPI: 1987 Revision. In January 1983, the method of measuring home ownership costs in the CPI-U was changed to a rental equivalence approach. This treatment calculates homeowner costs of shelter based on the implicit rent owners would pay to rent the homes they own. The rental equivalence approach was introduced into the CPI-W in 1985. The CPI-U was used to prepare the consumer prices tables below.

CPI Annual Average 1994