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How Inflation Is Measured: The Consumer Price Index

Last updated October 29, 2026

Most inflation claims cite the Consumer Price Index (CPI) from the Bureau of Labor Statistics. BLS calls it the most widely used measure of inflation. Knowing what the CPI covers, and what it doesn’t, helps you judge claims like “prices are up X% since…”.

What the CPI measures

BLS says the CPI represents changes in prices of all goods and services purchased for consumption by urban households. User fees such as water and sewer service, and sales and excise taxes paid by the consumer, are included. Income taxes and investment items such as stocks, bonds and life insurance are not.

Two main versions: CPI-U and CPI-W

BLS publishes indexes for two population groups. The CPI for All Urban Consumers (CPI-U) covers over 90 percent of the total population. The CPI for Urban Wage Earners and Clerical Workers (CPI-W) covers about 30 percent. The CPI-U includes professional, managerial and technical workers, the self-employed, short-term workers, the unemployed, retirees and others not in the labor force; the CPI-W includes only expenditures by people in hourly wage-earning or clerical jobs. A claim that uses one version can differ from a claim using the other.

Where the prices come from

Prices are collected in 75 urban areas from about 23,000 retail and service establishments, and rent data come from about 50,000 landlords or tenants, according to BLS. Each item’s weight is derived from spending on it as estimated by the Consumer Expenditure Survey. Prices are taken throughout the month.

National, regional and local indexes

Indexes are available for the U.S., the four Census regions, nine Census divisions, two size-of-city classes, eight region-by-size cross-classifications and 23 local areas, and for major spending groups such as food and beverages, housing, apparel, transportation, medical care, recreation, education and communication. Monthly indexes exist for the U.S., the regions and divisions, and some local areas. More detailed item indexes are available nationally than locally. Some series, such as the U.S. city average all-items index, go back to 1913.

Common ways CPI claims go wrong

Checklist before quoting inflation

  1. Which index (CPI-U, CPI-W, or another measure)?
  2. Which period: month over month, or 12 months?
  3. All items, or a single category?
  4. National or local?

Why the CPI matters beyond the headline

BLS lists three main uses. As an economic indicator, it’s the most widely used measure of inflation and a guide for economic decisions. As a deflator, the CPI and its components are used to adjust other economic series for price change, translating them into inflation-free dollars. And as a way of adjusting dollar values, it’s used to adjust income payments such as Social Security, income eligibility levels for government assistance, and cost-of-living wage adjustments.

BLS says the index affects the income of more than 108 million people because of statutory action, including over 67 million Social Security beneficiaries and over 41 million SNAP recipients. It’s also used to adjust the federal income tax structure, which BLS says prevents inflation-induced increases in tax rates, and some private contracts use it to adjust rents, royalties, alimony and child support. That’s why small differences between CPI versions can matter in policy arguments.

Sources

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Last updated October 29, 2026. Facts checked October 29, 2026 against the official sources linked above. EvenFacts is independent and isn’t affiliated with any government agency, party or candidate. This explainer is general information, not legal or financial advice, and it doesn’t take a side.