Economy & context
The Consumer Prices Index measures price change for a representative basket of household goods and services under a published methodology. It is a weighted index, not a list of every person's expenses.
Make it click
A regular basket contains rent, food, travel and services in chosen proportions. Repricing the same basket through time creates an index of broad consumer prices.
Now put that into markets
Statistical agencies sample prices, update weights and adjust some products for quality. Annual inflation compares index levels across twelve months.
Different CPI variants handle housing, owner occupation and coverage differently. Contributions depend on both price movement and basket weight.
Name the exact index, month, annual or monthly change and data release. Inspect component contributions and base effects.
CPI is an estimate for a representative basket and may differ from lived inflation. A falling annual rate can occur while the price level still rises.
Takeaway
