Consumer Price Index Definition
CPI is the acrostic for Consumer Price Index. The CPI is very useful because it is a sort of guide to inflation in the USA. In order to check the variations, it examined a “basket of goods” containing some products, the most important in the normal life of a person living in the US, using them to check the differences in price from a year to another. These products could be milk, bread, eggs, water and so on.
There are three important figures involved in the CPI: the first is the CPI for Urban Wage Earners, the second is represented by Clerical Workers (CPI-W) and the last all Urban Consumers (CPI-U). This last varies a lot depending on seasons because some products are not found in winter for example but you can eat them in summer. This is true above all for fruits and vegetables. Apart the Core CPI that is represented by consumers, there is the Chain-Weighted CPI too. This is particularly important because it is based on the choices of consumers. All this is extremely interesting because if a person buy a product as a substitute of a cheaper one, this is measured by the CPI. Of course, this research, registers also the geographic area where products are sold and bought so it is possible to do different lists for every place.
Of course this is extremely important for investors who direct their own business considering all these data also because they are always changing. Only after analysing these data, investors can do their choices.
The CPI is the basis of economy in the United States because all sectors are influenced by it. Insurances, medical cares, cost of livinf and every sort of services, are based on the results of the CPI. This is the reason many investors can say that it is the reason of their business and they are related to it for every idea they can have in mind. The rate of inflation is a sort of judge for investors.
All data are published and deeply analyzed by media. It is important to do researches about them and investigate the weak points.
These researches are conducted by some agencies run by the Government itself that is particularly interested in the different markets and their health.
The data are also published. Immediately after, many consumers are interested in seeing the results. They can create their own account with a pin they use to log on. Clicking on Economic Calendars, it is possible to discover the price action for many products. This data are key points for the economy and they decide if it can grow or not. Moreover, they are absolutely vital to move markets even though not all products can help this process to go on. Employment is also directed by these results and inflation depends entirely on them. Notwithstanding the expectations, sometimes there are some results that cannot be expected. The power and the strenght of currency is based on Forex economic indicator too and equally important to give the economy a particular trend to predict how business can go. This is the so called leading indicators factor. The lagging indicators, instead, are considered after economy has already started its new trend. From these indicators, it is possible to check the changes the market has registered.
It is easy to understand that all this is extremely interesting both for consumers and investors who can have a preview of the ongoing cost of living and the future of business. This is the main reason the CPI is so important for the economy in the US and in the other continents.