Ramsey County

Making $ense of Dollars and Cents

January 21, 2008

Consumer Price Index

          Whenever the words inflation and economy are mentioned in the same sentence, you can be certain the discussion will soon include the latest news on the Consumer Price Index or CPI.  

          The CPI is a measure of the average change in prices over time of goods and services purchased by households. It is developed from detailed expenditure information provided by families and individuals on what they actually bought. Information is collected in 87 urban areas across the country from about 50,000 housing units and approximately 23,000 retail establishments.  Included in that group are department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments.  All taxes directly associated with the purchase and use of items is included in the index.  Prices of fuels and a few other items are obtained every month in all 87 locations.  In calculating the index, price changes for the various items in each location are averaged together with weights, which represent their importance in the spending of the appropriate population group.  Local data are then combined to obtain a U.S. city average. 

          The Consumer Price Index is frequently called a cost-of-living index, but it differs in important ways from a complete cost-of-living measure. A cost-of-living index measures changes over time in the amount that consumers need to spend to reach a certain utility level or standard of living. Both the Consumer Price Index and a cost-of-living index reflect changes in the prices of goods and services, such as food and clothing that are directly purchased in the marketplace; but a complete cost-of-living index goes beyond this to also take into account changes in other governmental or environmental factors that affect consumers' well-being.

          For the current Consumer Price Index this information was also collected from the Consumer Expenditure Survey.  For two  years, about 10,000 families from around the country provided information on their spending habits in a series of quarterly interviews. To collect information on frequently purchased items such as food and personal care products, another 7,500 families in each of the 2 years kept diaries listing everything they bought during a 2-week period.

          The CPI is, along with the population census and the National Income and Product Accounts, one of the most closely watched national economic statistics.    

     For further details visit the CPI home page on the Internet at:

 http://www.bls.gov/cpi/  

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524 4th Ave NE #5, 2nd Floor Ramsey County Courthouse
Devils Lake  ND  58301
701-662-7027
email - ramsey@ndsuext.nodak.edu