Consumer prices are the prices that consumers face when purchasing goods and services. Changes in consumer prices are an important economic indicator.
The most prominent index of consumer price changes in the United States is the Consumer Price Index that is published on a monthly basis by the U.S. Bureau of Labor Statistics.
The CPI is compiled by averaging consumer prices of goods and services across 38 urban geographic areas and comparing this aggregate value to that of a certain base period. The CPI market basket includes items in 211 categories that are further separated into eight groups: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. Releases of new CPI data are closely scrutinized in the U.S. as the index is the primary indicator of inflation in the United States and hence influences financial decisions on many levels.
The Consumer Price Index is often used as a measure of changes in the cost of living. And although it serves well as a rough estimate in this context, it is not completely accurate. It is compiled based on a fixed market basket of goods that is updated every second year. Consumers tend to react to price changes immediately, though, by substituting more expensive goods with cheaper ones. That is why the Bureau of Labor Statistics introduced the Chained Consumer Price Index for the U.S. in 2002. The Chained CPI is based on the same bundle of goods but its calculation allows for substitution between categories at any time. It is hence considered to be a more accurate indicator of the actual cost of living.
Consumer prices in the United States have been rising continuously for the last five decades. The only exception came during the financial crisis in 2009 when consumer prices declined for the first time since 1955. The 2013 CPI was 233 compared to an index value of 100 during the base period, between 1982 and 1984. I.e. consumer prices in the United States more than doubled between 1984 and 2013.
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