The consumer price index (CPI) is determined by tracking price changes in a market basket of consumer goods and services for a certain period of time. The Bureau of labor statistics produces several different consumer price indices month-on-month, the consumer price index most often mentioned in the media the consumer price Index for all urban consumers (CPI-u).
Market basket the CPI was created based on research of consumer preferences. The Bureau of labor statistics used the polls to select more than 200 categories of goods and services for observation. The consumer price index increases or decreases based on average price movements inside the consumer basket.
Every month, economic experts from the Bureau of labor statistics (BLS) will either visit or call a retail stores, professional offices, rental units and other institutions across the country to collect price information in the consumption basket of the CPI. After the data was collected by the commodity specialist will check it for accuracy and statistical adjustment based on the value of any given item.
The CPI is considered by many to be the benchmark for inflation in the U.S. economy. In fact, it is reported, the rate of inflation is often simply the percentage change in the CPI-U.
Others, however, question how useful the CPI actually is. The Bureau of labor statistics, the U.S. revised the methodology used for the calculation of CPI several times, usually leads to a decrease reported an increase in the price level. Consequently, some believe that the CPI (intentionally or otherwise) underestimates the impact of inflation. (For associated reading, see: why the consumer price Index is controversial.)