CPI Formulas
The CPI-U calculation involves two main formulas. One formula calculates the current cost of the weighted average basket of goods, while the other formula examines the year-over-year change.
The Consumer Price Index (CPI) is calculated using a mix of goods and services that are commonly bought by Americans. Each item in the basket is weighted based on its sales. The CPI is usually over 100, indicating price increases in the market. The Bureau of Labor Statistics (BLS) compares the current year’s CPI with the previous year’s to determine the inflation rate.
The Consumer Price Index (CPI) is determined by considering a variety of goods and services that are typically purchased by Americans. Each item in the basket is given a weight based on its sales. The CPI is generally above 100, indicating rising prices in the market. To calculate the inflation rate, the Bureau of Labor Statistics (BLS) compares the current year’s CPI with that of the previous year.
The BLS releases the monthly CPI data, highlighting changes from the previous month for the overall CPI-U and its main subcategories, as well as the year-over-year unadjusted change. The detailed tables from the BLS show price changes for various goods and services grouped under eight spending categories.
Subcategories cover price changes for items ranging from tomatoes and salad dressing to auto repairs and sporting event tickets. Price changes for each subcategory are provided with and without seasonal adjustments.
Apart from the national CPI indexes, the BLS also publishes CPI data for U.S. regions, sub-regions, and major metropolitan areas. Metro data tends to have wider fluctuations and is mainly useful for identifying price changes based on local conditions.
