March Consumer Price Index Registers a Modest Increase

Written by: John Landers

The U.S. Bureau of Labor Statistic’s Consumer Price Index (CPI) for March 2012 shows gasoline leading the way as the indicator rose to an annual rate of 2.7 percent for March. Gasoline prices climbed 1.7 percent for the month. Over the course of  a year, gasoline prices would have an annual inflation rate of 8.7 percent.

Overall, the prices of goods and service increased 0.3 percent– in line with economists’ estimations and lower than the 0.4 overall increase registered in February. The March CPI registers lower than the 2.9 percent rate of inflation recorded in February. The core inflation rate, which subtracts food and energy costs, rose 0.2 percent during March, the equivalent of an annual inflation rate of 2.3 percent.

CPI Explained

The CPI focuses on the spending habits of urban consumers and urban wage earners and clerical workers.

Urban Consumer Group (CPI- U) – Eighty-seven percent of the U.S. populace fit into this group. The CPI-U considers the majority of residents living in metropolitan locations. CPI-U includes self-employed, professionals, retires, poor Americans, unemployed people, clerical workers and other urban wage earners.

The CPI does not include the spending patterns for Armed Services members, residents living in rural locations, farmers, or people who live in institutions.

Urban Wage Earners and Clerical Workers (CPI-W) – The CPI-W component of the Consumer Price Index computes expenditures of households as defined in the Urban Consumer Group, along with two other conditions:

1) Over 50% of the household income has to come from clerical workers or wage earners.

2) At least one of the household earners must have a minimum of 37 weeks of employment during the past 12 months.

This component of the CPI encompasses around 32 percent of Americans and makes up a subset of the CPI-U group.

Goods and Services Measured by the CPI

The consumer price index measures over 200 goods and services, divided into eight major groups, purchased by either CPI-U or CPI-W. The eight categories measured by the CPI are:

  • Food and beverages
  • Housing
  • Apparel
  • Transportation
  • Medical care
  • Recreations
  • Education and Communication
  • Other goods and services

Other goods and service includes items like haircuts, pedicures, smoking products or burial services. Other goods and services measured by the index include user fees for water, sewage or vehicle registration. The CPI calculations include taxes associated with the purchase of goods and services including property taxes. The Consumer Price Index excludes income taxes, social security tax and investments.

Economists and market analysts rely on the CPI for a number of uses, such as an economic indicator, a deflator for other indicators or use to adjust dollar values.

The CPI represents the impact of price increases on average households. Consequently, the CPI will not reflect the exact effects of price increases on individual households. Do not confuse the CPI with the cost-of -living index. According to the Bureau of Labor Statistics, the cost-of-living index monitors price changes over time and calculates the amount necessary for consumers to attain a specified standard of living.


March Consumer Price Index Registers a Modest...

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