CPI - Consumer Price Index

Definition?

The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The U.S. Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. The CPI is one of the most popular measures of inflation and deflation. The CPI report uses a different survey methodology, prices sample and index weights than the producer price index (PPI), which measures change in the prices received by U.S. producers of goods and services. The BLS collects about 94,000 prices monthly from some 23,000 retail and service establishments. Although the two CPI indexes calculated from the data both contain the word urban, the more broad-based and widely cited of the two covers 93% of U.S. population. The monthly CPI release from the BLS leads with the change from the prior month for the overall CPI-U as well as its key subcategories, along with the unadjusted change year-over-year. The detailed tables show price changes for a variety of goods and services organized by eight umbrella spending categories.

News

U.S. equity markets fell last week following steep losses in the second half of the week. Declines were driven by concerns about inflation and expectations of more aggressive tightening by the Federal Reserve, after the Labor Department’s latest Consumer Price Index (CPI) report showed the annual rate of inflation rising to a new 40-year-high of 8.6% in May, the highest reading since December of 1981. The week’s decline marks the tenth in the past eleven weeks for the Dow, and the ninth in the past ten weeks for the S&P 500 and Nasdaq. For the week, the Dow declined 4.6%, the S&P 500 retreated 5.1%, while the Nasdaq contracted 5.6%. Meanwhile, the yield on the 10-Year U.S. Treasury note rose steeply to 3.15%. Crude oil prices rose slightly to $120 per barrel, as fuel demand in the U.S. remains strong ahead of the summer travel season. The nationwide average price of a gallon of gas surged to new records, reaching $4.99 on June 10, according to the AAA. This week, the spotlight will be on the Federal Reserve’s two-day policy meeting, which kicks off on Tuesday. Market watchers will be anticipating the Federal Open Market Committee’s key interest rate decision on Wednesday, in which the U.S. central bank is expected to raise its benchmark federal funds rate by 50 basis points. We can also expect the release of several important economic indicators, including the Producer Price Index and retail sales figures for May. Later in the week, key updates on the state of the housing market will feature the latest data on housing starts and building permits tracking the month of May. Corporate earnings releases will be subdued, with many firms having already reported first-quarter earnings. Oracle Corporation will report on Monday, followed by Adobe and Kroger on Thursday.