The Consumer Price Index (CPI) is a weighted average of prices of a typical “basket” of goods and services that a consumer is likely to need on a regular basis. This not only includes common grocery items, but also transportation, medicine, education, housing and other goods and services associated with cost of living. Altogether, about 80,000 items are assessed and weighted according to how essential they are. CPI is often expressed as a percentage increase or decrease from a base year.
The US Bureau of Labor Statistics has calculated CPI since 1913, and continues to report CPI monthly. The most commonly watched version of the CPI is the CPI-U which monitors urban consumers, approximately 88% of the US population. As a measure of prices, CPI is often used as an economic indicator, particularly for assessing inflation of deflation. CPI is also used by the government to determine financial needs in assistance programs like Social Security.
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