CPI: Consumer Price Index

Definition: A measure of change in the cost of the consumer basket of goods and services.

CPI is the main inflationary indicator. It measures retail price changes in consumer goods and services, included into the fixed consumer basket, such as food, clothes, educational and health care services, expenditures, expenditures on transport, utility bills, rest etc. The set of goods and services, included into the consumer basket, reflects typical set of goods commonly purchased by the population of a country.

CPI – is “headline inflation”, used to calculate minimum level wage, necessary to compose the nation's budget. Once costs of consumer basket in 85 cities of the country are analyzed, Bureau of Labor statistics, U.S. Department of Labor defines the index value.
In the USA CPI figures are collected from over 19000 retail establishments and 57000 households (about 80% of home population). Consumer basket is composed of goods (44.1%) and of services (55.9%). No possible discount is taken into consideration when calculating this index. Moreover, improving quality of goods and services are also ignored. CPI Ex Food & Energy is considered to be more reliable, as these goods are most changeable.

CPI is analyzed together with PPI. In case economic rate of growth is quite stable, CPI and PPI increase may trigger interest rates raise. It will bring about USD advance as due to high interest rate investment becomes more profitable.

CPI Ex Food & Energy - Core CPI is considered to be more reliable, as these goods are most changeable .

Source: Bureau of Labor statistics, U.S. Department of Labor.

Frequency: Released monthly (on Tuesday or on Thursday) soon after PPI release at 16:30 GMT+3.

Market importance: High

Analysis: CPI is increasing. Core CPI rates of growth are more stable, as Food and Energy, the most volatile components, are not taken in consideration. Lately CPI has been decreasing on oil prices decline.

Analysis: Monthly gain of core CPI steadied, the rates of growth are still high. The indicator has been above zero since the end of 2005, which signals that inflationary pressure has been in effect. Oil prices fall will trigger decrease in the indicator.

Analysis: Annual rates of growth of CPI decreased sharply in July-October, having reached the lowest levels within the last three years, recently CPI has recovered. Core CPI decreased, it still remains much above 2%.

Conclusion:
1. Correlation of CPI and energy prices is quite high. Average monthly oil prices fell sharply in January by 12.3%, which may trigger inflationary pressure decrease. Weak economy will be favourable for inflation slowdown in the USA in the mid-term plan. The rates of growth of core CPI are at the highest levels, though decline may be expected.
2. CPI forecasts seem to be overestimated, January sharp fall of oil prices signals in favor of release of lower figures than expected.