CPI (Consumer Price Index)

The Consumer Price Index (CPI) is published monthly by the Bureau of Labor Statistics and measures how much prices have increased for a "basket" of everyday goods and services including food, housing, transportation, healthcare, and education.

How It Works: The BLS tracks prices of ~80,000 items across 23,000 retail stores and 50,000 housing units. If the CPI increases 3.2% year-over-year, it means the average consumer pays 3.2% more for the same goods than last year.

Why It Matters for Personal Finance:

1. Rent Control: Many cities cap rent increases at "CPI + X%." California allows 5% + CPI (max 10% total).
2. Social Security: Benefits adjust annually based on CPI to maintain purchasing power.
3. Salary Negotiations: A 2% raise when CPI is 3.5% is actually a pay cut in real terms.
4. Investment Returns: A 7% return with 3% CPI means 4% real return.

CPI Components (2024 weights):

• Housing: 34%
• Transportation: 16%
• Food & Beverages: 14%
• Medical Care: 8%
• Education: 6%
• Other: 22%

Personal Inflation: Your actual inflation may differ from CPI depending on spending patterns. Urban renters experience higher inflation than rural homeowners. Parents with college-age kids face higher inflation than retirees.

Use in Rent Calculations: If your lease allows "CPI-based increases," expect 2-4% annually in normal years, 5-8% during high inflation periods (like 2021-2023).