Consumer Price Index

The large rise in Consumer price index during a short period of time typically denote periods of inflation and large drops in Consumer price index during a short period of time usually mark periods of deflation

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The Consumer Price Index (CPI), the principle gauge of the prices of goods and services, indicates whether the economy is experiencing inflation, deflation or stagflation.

The CPI's results are widely anticipated and watched; the CPI plays a role in many key financial decisions, including Federal Reserve interest rate policy and the hedging decisions of major banks and corporations.

Individual investors can also benefit from watching the Consumer price index when making hedging and allocation decisions.

The extensive measures like consumer price index taken to formulate a clear picture of changes in the cost of living helps key financial players get a sense of inflation, which can destroy an economy if it's allowed to run rampant.

The CPI is often used to adjust consumer income payments for changes in the dollar's value and to adjust other economic series.

Social Security ties the CPI to income eligibility levels; the federal income tax structure relies on the CPI to make adjustments that avoid inflation-induced increases in tax rates and finally, employers use the CPI to make wage adjustments that keep up with the cost of living.

Data series on retail sales, hourly and weekly earnings and the national income and product accounts are all tied to the CPI to translate the related indexes into inflation-free terms.

The CPI is probably the most important and widely watched economic indicator, and it's the best known measure for determining cost of living changes.

The CPI is used to adjust wages, retirement benefits, tax brackets and other important economic indicators. It can tell investors some things about what may happen in the financial markets, which share both direct and indirect relationships with consumer prices.

The CPI reflects the spending patterns of each of two population groups: all-urban consumers and urban wage earners and clerical workers, which include professionals, the self-employed, the unemployed, and poor persons.

The CPI is used as an economic indicator, a deflator of other economic series, and a means of adjusting dollar values.

While sometimes referred to as a cost-of-living index, the CPI differs in important ways from a complete index because it does not take into account changes in other factors that affect consumer well-being and are difficult to quantify, such as safety, health, water quality, and crime.

A comprehensive measure used for estimation of price changes in a basket of goods and services representative of consumption expenditure is called consumer price index.