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Consumer Price Index (CPI)

Moomoo News ·  Aug 14, 2020 00:51  · Economics

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U.S. consumer prices rose in July by more than expected on a jump in auto and apparel costs, though inflation remained broadly muted as the pandemic suppressed demand.

The consumer price index rose 0.6% from the prior month, following a 0.6% gain in June, Labor Department figures showed Wednesday. The median forecast in a Bloomberg survey of economists called for a 0.3% increase. Compared with a year earlier, the gauge increased 1%, after June's 0.6% rise.

Excluding volatile food and fuel costs, the so-called core CPI -- viewed by policymakers as a more reliable gauge of price trends -- rose 0.6% from the prior month, the biggest jump in almost three decades, after a 0.2% increase in June. On an annual basis, core inflation measured 1.6%, a four-month high, following 1.2% in June.

You had significant contributions from categories that basically are just payback from previous drops. That's not a sustained increase in inflation. The bigger picture here is that you're going to have a persistent output gap and elevated unemployment and that's going to put downward pressure on wages.

-Brett Ryan, senior U.S. economist at Deutsche Bank Securities

What is Consumer Price Index (CPI)?

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. 

It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living. 

The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.

Why is Consumer Price Index (CPI) important?

The consumer price index measures how the cost of a sample shopping cart of staples changes over time. There's lots of stuff in the cart.

Almost everything you could think of that you buy.

-Steve Cecchetti, an economist at Brandeis University

The CPI can affect your wallet. Your boss may use it to calculate your next raise to keep it above inflation. And Social Security cost-of-living adjustments are tied to the CPI.

In other words, CPI is an economic indicator, the most widely used measure of inflation and, by proxy, of the effectiveness of the government's economic policy. The CPI gives the government, businesses, and citizens an idea about price changes in the economy, and can act as a guide in order to make informed decisions about the economy.

source by Marketplace, Investopedia, and Bloomberg

editor: Eric

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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