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13 Facts About the Consumer Price Index

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The Consumer Price Index is the best known indicator of inflation. Learn 13 facts about the Consumer Price Index to better understand the role it plays in economics.

Expenditures

The Bureau of Labor Statistics separates all expenditures into eight categories and gives each a relative size. The Consumer Price Index for Urban Consumers is known as the CPI-U or CPI.

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Urgent Categories

The first three categories follow the conventional order of urgency: food, shelter and clothing. Transportation precedes medical care, and recreation comes before the combined category of education and communication. Medical care is the fastest growing category since 2000.

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Other Goods and Services

Other goods and services includes tobacco, funeral services, financial services and cosmetics. The cost of lawn care and gardening services was up 7.6 percent in 2018 from 2017, which CNN business linked to a shortage of people willing to work those jobs.

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Apparel

Apparel has been deflating as a category since 2000 and is currently at 3.101 percent of the CPI. Apparel has wide fluctuations by season.

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Transportation

At 15.259 percent of the CPI, transportation is another category with dramatic volatility and includes many subcategories. The motor fuel subcategory drives much of the irregularity due to changing gasoline prices.

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Energy

Energy doesn't have its own category but is included as a subcategory in both housing and under transportation's fuel subcategory. Expenditure changes in other goods and services also reflects energy costs indirectly across the CPI.

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Core Inflation

Core inflation is the overall inflation rate except for energy and food. Food is the major part of the food and beverage category; BLS defines "beverage" as alcoholic beverages.

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Historical Data

Since 1913, the BLS has compiled CPI data. Information going back to 1872 was tracked in Warren and Pearson's price index.

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Inflation vs. Deflation

Barry Ritholtz of Ritholtz Wealth Management points out that from 1997 to 2017, health care and college were the biggest outliers in inflation, as reported in Market Watch. Meanwhile, technology, clothes, cars and TVs showed deflation in prices.

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Prices on the Rise

The CPI rose 2.9 percent in June 2018, its fastest pace since 2012. The Federal Reserve also watches the Personal Consumption Expenditures metric, which tracks rural citizens and indirect expenditures such as employer-sponsored health benefits.

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Oil Prices

The price of oil is driving many of the recent CPI increases, which is over $70 a barrel today. High oil prices raise the rate of everything from fast food to Lyft rides.

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Federal Reserve

The Fed is more interested in the "core" PCE and CPI, which excludes food and energy. Core CPI has risen above the 2 percent mark on several occasions since the recession; core PCE has not.

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Housing Prices

Housing prices have seen consistently high growth since the recession, leading many economists to argue that the Federal Reserve should remove housing from the "core" inflation rate. These economists want to wait to increase interest rates higher until the unemployment rate sinks lower, as reported in CNN Business.

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