What is the consumer price index (CPI) used to measure?

The consumer price index (CPI) measures the average change in prices paid by consumers for a specific market basket of goods and services over time. It reflects how the prices of essential items, such as food, housing, clothing, transportation, and healthcare, shift within the economy.

By tracking these price changes, the CPI provides a valuable insight into inflation and the cost of living. It is widely used by policymakers, economists, and researchers to assess the economic health of a country, as well as adjust income payments, such as social security benefits, and evaluate the effectiveness of economic policies.

The CPI specifically focuses on the spending habits of consumers and is crucial for understanding how consumer purchasing power is affected by price fluctuations. Thus, this measurement is foundational in establishing both economic trends and the financial well-being of households.