Measuring Inflation

The Consumer Price Index tracks the prices of a representative basket of goods that typical households buy. Statisticians update the basket regularly, adding streaming services and dropping DVD players. Each month, the US Bureau of Labor Statistics checks prices on roughly 80,000 items across about 23,000 retail locations.

CPI has known blind spots. It can struggle with quality improvements and new products - a phone today does far more than one from 2010, and statisticians have to separate true price change from better features. The Bureau of Labor Statistics uses quality adjustments for many items, but measurement is still imperfect. Housing costs are notoriously tricky to measure, and different households experience very different inflation rates.