Have you ever wondered what exactly goes into the Consumer Price Index?
Many people – and certainly the majority of financial institutions and investors trying desperately to read the CPI’s tea leaves to make smart stock market decisions – know that it measures the “average change over time” in how much urban consumers are paying for a specific list of consumer goods and services.
But what exactly are those goods and services and where are they collected?
Right now, the whole market rides on data collected from 75 urban areas, around 22,000 retail establishments and about 6,000 housing units.
For a nation as large as the U.S., looking at that slice of America means items and services included need to be representative of what the country as a whole is experiencing.
But in the case of some of the more random or outdated goods monitored, it can raise questions about whether or not the CPI itself could use a refresh.
Take a look below at five of the weirdest things the Consumer Price Index tracks, and how much importance they have to the report’s overall score. All numbers are from the December 2022 CPI report.
Wondering how the price of pastry tarts is affecting you and your neighbors? The CPI has you covered, measuring how expense tarts specifically are and whether or not that number has changed substantially. The tarts themselves are included in the report’s larger look at subcategory “other bakery products,” which also includes frozen and refrigerated bakery products, pies and turnovers.
Slotted deep down in the foods category under “other,” you’ll find an analysis of the price tag of pickles, relishes and olives. Seasonings overall had a weighted relative importance of 0.34 total — olives included.
Included under “recreation services” you’ll find the surprising inclusion of video rentals, as well as how many “video discs” and other related media were costing consumers. For context, Blockbuster Video shuttered its operations in 2014, but Redbox Automated Retail was acquired by Chicken Soup for the Soul Entertainment in August 2022, keeping video kiosks alive somewhere. The category that video rentals appears in has a weighted relative importance of 0.094 to the report’s overall score.
Lumped in with fabric and supplies, how sewing machines were priced is all part of the “other recreational goods” portion of the report. That metric is given a weighted relative importance 0.026 overall.
That’s right, the Bureau of Labor Statistics has been hard at work looking deeply at the cost of frankfurters, listed under “other meats” in the report’s food measurement breakdown, as Americans struggle to keep up with inflation. When combined with lunch meats, frankfurters have a weighted relative importance 0.0252. Remember that the next time you have a hot dog.
When did the CPI last change what it measures?
Eric Swanson, professor of economics at the University of California, Irvine, told The Hill that the most recent updating of the basket composition and basket weights will be for the January 2023 price index.
But how and what the BLS measures doesn’t always mean it will show up right away in the most recent CPI report.
The CPI doesn’t always have real-time data
“There’s a lag between when the basket is measured and when it gets used in the CPI calculation, however,” Swanson said.
“For example, the weights they’re using this year are based on consumer patterns from 2021. This does raise some issues that maybe households spending patterns in 2021 were unusual because of the pandemic,” he said.
“For example, people presumably did not go out to eat much in 2021,” Swanson pointed out. “I’m not sure what the BLS is doing to try to correct for that problem.”