Consumer Price Index (CPI)

A Consumer Price Index (also known as “CPI”) is utilized to calculate the estimated amount of money spent on consumer goods and/or services per household. The CPI will measure the difference in costs for a specific number and type of goods and/or services from one time period to another in a certain geographic zone, such as a particular city, state, region, or country. With this information, the CPI can calculate the amount of fluctuation in costs of living due to economic inflation. This makes the CPI one of the most attentively monitored national economic statistics available.

The CPI is calculated using specific sets of numbers. These are the “price data” (or the costs of samples of the goods and services from different outlets) and the “weighting data” (or a number based upon expenditures monitored over decades from a sampling of households in the area). These statistics are becoming more and more accurate over time, as computerized bar codes and scanners in stores make it easier to track actual purchasing and pricing information.

There are also similar indicators used in other countries outside of the United States, such as the United Kingdom, Iceland, and other countries, each of which will calculate their own economic statistics under alternative names.

The CPI can provide an interesting snapshot of the inflationary growth in a country. For example, in the years between 1971 through 1977, the CPI of the United States increased by a hefty 47%! On the other hand, in the year 2009, the CPI dropped for the first time in over four decades, since 1955.

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Read more on Consumer Price Index - CPI (CPIS) at Wikinvest

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