The Consumer Price Index, or CPI, measures how the price of a weighted “basket” of commonly-purchased goods changes over time. The CPI is the most commonly used measure for determining monthly and annual inflation (or deflation) levels.
The Consumer Price Index is a weighted average used by the Bureau of Labor Statistics (BLS) to measure price changes over time.
The Index relies on the price of a “basket” of common consumer goods and services. To calculate the index, prices are added together, averaged and then weighted according to their importance in consumer budgets.
Goods and services used in the CPI are determined based on data provided by consumers and retailers in nearly 90 urban areas. Current categories (and their most recent weights) include:
The BLS publishes two CPIs each month:
Additionally, the BLS releases multiple versions of the same CPI. For instance, some include fuel and food prices, while others exclude these more volatile items. The BLS also offers regional and local CPI numbers, as well as seasonal adjustments.
The Consumer Price Index has many applications, including:
As such, the CPI impacts consumers and investors alike. For example, the Fed often uses the CPI to inform monetary policies, which affects economic growth and consumer and business spending and profits. From there, these changes can bleed into your investment portfolio to produce short- and long-term effects.
The Consumer Price Index is an essential economic metric for investors and consumers alike. You’ve likely felt its importance before: namely, when your investors benefit or suffer thanks to inflation.
Fortunately, Q.ai offers a quick and easy way to capitalize on CPI changes with our Inflation Kit. While we can’t take the sting out at the grocery store, we can help find long-term success, regardless of how the CPI moves this month.
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