Salary FYI

Consumer Price Index

Economics

A measure of the average change over time in the prices of a fixed basket of goods and services purchased by consumers, used as the primary gauge of inflation.

## Consumer Price Index (CPI)

CPI tracks price changes for a representative basket of consumer goods and services. It is the most widely used measure of inflation.

### CPI Basket Categories (US)

| Category | Weight |
|----------|--------|
| Housing (shelter) | ~36% |
| Transportation | ~16% |
| Food | ~13% |
| Medical care | ~7% |
| Education & communication | ~6% |
| Recreation | ~5% |

### Uses

- Adjusting tax brackets for bracket creep.
- Indexing Social Security benefits (COLA).
- Calculating real wage growth.
- Salary negotiations (demonstrating purchasing power loss).

### Limitations

CPI may not reflect individual experience: renters face different inflation than homeowners, urban vs. rural costs differ, and CPI doesn't fully capture quality improvements in goods.