Frequently Asked Questions

What is the inflation rate?

Inflation is an increase in the overall level of prices, measured by a price index. The rate of inflation is a measure of how fast prices are rising, it is computed as the percentage increase in the level of price index between two time periods.

What is Consumer Price Index (CPI)?

The consumer price index (CPI) is a widely used measure of the overall price level, calculated using a representative basket of goods and services purchased by consumers. The Bureau of Labor Statistics (BLS) of the U.S. Department of Labor collects the price information and constructs the CPI index. The selection of goods and services used to construct CPI, commonly referred to as the "market basket", is based upon actual consumer purchasing patterns, which are determined from a survey of consumer expenditures. Goods and services in the market basket are weighted according to the share they constitute of total consumer spending. The major expenditure categories are:

• Food and beverages
• Housing
• Apparel
• Transportation
• Medical care
• Recreation
• Education and communication
• Other goods and services

What are the CPI-U and the CPI-W?

BLS constructs two versions of the CPI index, for two population groups:

1. All Urban Consumers (CPI-U)
2. Urban Wage and Clerical Workers (CPI-W)

The CPI-U is intended to measure consumer price inflation for all U.S. residents of urban areas, which accounts for about 87 percent of the U.S. population. The CPI-W is used to measure consumer price inflation for a subset of the CPI-U population - residents of urban areas who live in households that receive more than half of their income from clerical or wage occupations a have one earner employed for at least 37 weeks during the previous 12 months. The CPI-U thus includes, in addition to wage earners and clerical workers included in CPI-W, groups such as professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, and retirees and others not in the labor force. The CPI-W covers about 32 percent of the U.S. population. The CPI-U is the most commonly used index because it has the broadest population coverage, but CPI-W is often used to make cost-of-living adjustments for labor contracts.

What is the Seattle CPI?

In addition to the national CPI, the BLS publishes CPI statistics for 26 of the nation's metropolitan areas. CPI-U and CPI-W are thus available for the Seattle-Tacoma-Bellevue metropolitan area, which includes King, Pierce, and Snohomish Counties. 

How often are CPI data published?

U.S. CPI data is published each month The Seattle CPI data is published bimonthly (every other month) beginning with February.

How do you use the CPI to measure inflation between two time periods?

To compute the rate of inflation between two time periods, calculate the percent change in the appropriate CPI index from the first period to the second period. The following example computes the change in the Seattle CPI-U from 1998 to 2003:

How do you inflate a past dollar value into present-day dollars?

To inflate a past dollar value into present-day dollars, multiply the past dollar value by the ratio of the present year CPI to the past year CPI. For example, assume you want drop to know what a $100 in 1993 would be worth in 2003, based on Seattle area inflation.

How do you deflate a future dollar value into present-day dollars?

To deflate a future dollar value into present day dollars, multiply the future dollar value by the ratio of the current year CPI index to the future year CPI index. For example, assume you want to want to know what a $100 in 2013 would be worth in 2003, based on a forecast of Seattle area inflation.

How do you remove inflation from a historical series of prices?

Economists often want to remove inflation from a historical series of prices to see how those prices would have changed over time had there been no inflation. For example, we might want to remove inflation from a historical series of oil prices to see how current oil prices compare to oil prices at earlier times, such as following the 1973 oil embargo. To convert a historical series of prices into present-year dollars, multiply the dollar value for each year by the CPI index for the present year (in this example 2003), then divide by each year's CPI index, as shown below:

Where can I find more information about the CPI?

The U.S. Department of Labor's Bureau of Labor Statistics (BLS) website contains extensive information on the CPI, including explanations of the methodology and also provides access to historical CPI data: http://www.bls.gov/cpi/home.htm.