Financial FitnessGeneral Information

How Do We Measure Inflation?

By November 27, 2019 No Comments

The government measures inflation in eight major categories, and then weights them to produce an overall CPI index, or consumer price index.  The consumer price index is a measure of inflation compiled by the U.S. Bureau of Labor and Studies.  The CPI has the largest weighting in housing, which is 42%, while medical care makes up only 8%.

The Federal Reserve prefers to measure inflation using the PCE or Personal Consumption Expenditures, which is the personal consumption expenditure.  Both CPI and PCE normally exclude food and energy because of their volatile nature.

According to the Department of Labor, as of June 30th, the CPI annual rate was at 1.8% and the PCE was at 1.6%.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.