What does the consumer price index measure?

The consumer price index (CPI) is specifically designed to measure the average change over time in the prices paid by consumers for a market basket of goods and services. This includes various common consumer products, such as food, clothing, rent, healthcare, and more. By focusing on these products, the CPI provides insights into inflation and the overall cost of living for consumers.

Tracking the change in price of these items over a specific period, typically a year, allows analysts and policymakers to gauge how purchasing power is affected and to make informed economic decisions. The CPI is crucial for adjusting wages, pensions, and other benefits to maintain consumers' purchasing power in the face of inflation, making it a key indicator for economic health.