CPI Adjustments Aren’t Just for Stamps

CPI adjustments

Earlier this year, postage rates went up by a corresponding increase in the consumer price index (CPI). Tying a structured increase in prices or payments to the average price increase of products and services in the United States is a process used by many government agencies. Besides postage, the CPI is used to calculate cost-of-living adjustments in Social Security payments, food stamp benefits, collective bargaining agreement wages, and even school lunches. Since the CPI plays such a significant role for millions of Americans, let take a brief look behind the scenes at the number itself.

Generally, whenever prices go up or down for typical household goods and services, the CPI adjusts to reflect that change. While the core CPI number reflects an overall increase or decrease in consumer prices, it doesn’t mean that prices changes occur in lock-step with one another.

What’s interesting to note is that in the CPI report released on Jan. 16, the unadjusted rate increased 1.7 percent for 2012. That’s a significant reduction from the 3 percent increase realized in 2011 and nicely below the 2.4 percent average over the past 10 years. The most significant reductions were in energy and gas, though they were still higher for the year by .5 percent and 1.7 percent respectively.

Other 2012 price adjustments of note include:

–         Apples increased by 13.3 percent.

–         Lamb decreased by 16.5 percent

–         Unleaded regular gasoline increase 1.6 percent

–         Propane decreased by 11.7 percent

–         Boys apparel increased by 6.1 percent

–         Televisions decreased by 17.5 percent

For a complete breakdown of price changes in 2012, go to the Bureau of Labor Statistics website at www.bls.gov.

What do you think the CPI rate will be for 2013?

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