The Consumer Price Index: A Brief Overview (CRS Report for Congress)
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| Release Date |
Revised Feb. 17, 2010 |
| Report Number |
RL30074 |
| Report Type |
Report |
| Authors |
Brian W. Cashell, Specialist in Macroeconomic Policy |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
The Consumer Price Index (CPI) is perhaps the most widely reported measure of inflation. A number of federal government programs are regularly adjusted to account for changes in the CPI, such as Social Security benefits and the personal income tax rate schedule. Thus, the behavior of the CPI has important consequences for a large number of people. Many, however, may be unfamiliar with how the CPI is estimated.
For Congress, the CPI is of particular interest because of its significant effect on the federal budget. Changes in the CPI can have substantial effects on both revenues and outlays, and those changes may either reflect underlying economic conditions or result from methodological changes in the way the CPI is calculated.
The CPI is based on a number of sample surveys. One of these surveys estimates the purchasing patterns of the "typical" household to determine how that household spends its money. Another survey determines where those households shop, and a third survey collects prices on the goods and services purchased by those households.
The CPI measures the price level relative to a particular period. Currently, the CPI number for each month is a measure of the price level relative to what it was between 1982 and 1984. The CPI is available for a number of metropolitan areas but it does not allow comparisons of the cost of living in different cities.
