The Consumer Price Index measures the change in cost of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment, and education. The CPI is used as an economic indicator, a deflator of other economic series, and a means of adjusting dollar values. While sometimes referred to as cost of living index, the CPI differs in important ways from a complete index, because it does not take into account changes in other factors that affect consumer well being and are difficult to quantify, such as safety, health, water quality, and crime.
The CPI reflects the spending patterns of each of two population groups, all urban consumers and urban wage earners, and clerical workers, which include professionals, the self employed, and the unemployed and poor persons. The all urban group represent about 87% of the US population. CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. This is because large rises in CPI during a short period of time, typically denote periods of inflation and large drops in CPI during a short period of time usually mark periods of deflation.