This lesson focuses on the Consumer Price Index (CPI) and rate of inflation reported October 15, 2010, by the U.S. Bureau of Labor Statistics (BLS) for the month of September, 2010. Students read the BLS report, analyze the meaning of the CPI data, determine the change in consumer prices, and explore the impact of the change in the price level on themselves, their families, consumers, and producers.


Business Cycles, Causes of Inflation, Consumer Price Index (CPI), Cost-Push Inflation, Demand-Pull Inflation, Inflation, Inflation Risk, Macroeconomic Indicators, Price Stability


  • Identify the rate and change in the consumer price index and rate of inflation in the United States in September, 2010.
  • Identify factors that have influenced recent changes in the price level.
  • Describe how inflation impacts different groups in the economy.
  • Distinguish between the CPI-U, core rate and other measures of inflation.

Current Key Economic Indicators

as of April 4, 2015


The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in February on a seasonally adjusted basis. Over the last 12 months, the all-items price index was unchanged. The energy index increased after several months of decline. Core inflation rose 0.2% in February, the same increase as in January.

Employment and Unemployment

The unemployment rate stayed at 5.5% in March, 2015, according to the latest release from the Bureau of Labor Statistics on April 3, 2015. The number of jobs added was much lower than in previous months, with only 126,000 new jobs added to the economy, the fewest number since December of 2013. Some job categories added workers, including health care, professional and business services, financial services, and retail. Average hourly wage growth was 7 cents, but average hours worked fell.

Real GDP

Real GDP increased 2.2% in the fourth quarter of 2014, according to the final estimate released by the Bureau of Economic Analysis. This estimate is consistent with the revised estimate. In the third quarter, real GDP increased 5.0%. Consumer spending rose 4.4%, compared to 3.2% in the third quarter. Business investment and exports also increased. Offsetting these gains were increases in imports and decreases in federal government spending, particularly defense spending. (

Federal Reserve

In its March 18, 2015, statement, the FOMC cited the continued growth of the labor market, increased household and business spending, and below-target inflation as indicators of an economy that continues to recover. They expect below-target inflation to rise as oil prices increase in the medium term. The statement reaffirmed the FOMC intention to keep the federal funds rate at its current low level, but also said that a rate hike was highly unlikely at its April meeting. Notably, the FOMC dropped the word "patient" from its language describing its stance on an improving economy and a rate hike. The Fed revised downward its economic projections, including the rate of unemployment that would sustain a stable inflation rate.


Each month, the U.S. Bureau of Labor Statistics (BLS) releases an estimate of the level of the consumer price index (CPI) and the rate of inflation in the United States for the previous month. The report provides the most recent current and seasonally adjusted consumer price indexes for all urban consumers, urban wager earners, and the chained index, plus a breakdown by major expenditure groups. The BLS also collects price level data for major metropolitan areas and regions.

This lesson focuses on the October 15, 2010, BLS press release of data on the consumer price index for the month of September, 2010.

For the latest updates on U.S. economic indicators, go to:

[Note: You can subscribe to receive monthly BLS email news releases. To subscribe, go to the BLS News Service Subscription Page .]

[Note on the CPI and Inflation "Focus on Economic Data" LessonsDuring the first semester of this school year (September-December, 2010), EconEdLink will publish four lessons on "Consumer Price Index and Inflation." During this time period, the Focus on Economic Data will begin with the "basics" in September and progressively focus on more complex data, issues, and comparisons. All monthly lessons will include the current data and significant recent changes.

  • September: CPI and inflation (deflation) basics: What is the CPI? What is inflation and deflation? How are they measured? What do they mean?
  • October: Details and issues about the measurements and meaning of the measurements of the price level, adding additional concepts. March: Detailed breakdown of the data by region and other criteria (trends, identifying trends and comparisons of regions and demographic groups).
  • November: U.S. regional and global price level and inflation comparisons.
  • December: The relationships of CPI and inflation data to other economic data, such as GDP, employment. etc. and the business cycle. End of year price level summary and potential issues.]


Key Economic Indicators

as of October 15, 2010


The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.1 percent before seasonal adjustment.

Employment and Unemployment

U.S. nonfarm payroll employment edged down by 95,000 jobs in September, and the unemployment rate was unchanged at 9.6 percent. Government employment declined by 159,000 jobs, reflecting both a drop in the number of temporary workers for Census 2010 and job losses in local government. Private-sector payroll employment continued to trend up modestly by 64,000 jobs.

Real GDP

U.S. real gross domestic product increased at an annual rate of 1.7 percent in the second quarter of 2010, according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent. (

Federal Reserve

The Federal Open Market Committee (FOMC) will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.


For the past year, the Federal Reserve's monetary policy statements have referred to U.S. inflation in terms such as "stable" and "subdued."  Even the Fed's monetary policy actions to keep interest rates rates as low as possible have not resulted in any significant upward pressure on the overall price level.

As usual, energy and food prices have fluctuated more than most other prices, but have not risen enough to result in a significant rise in the consumer price index over the time period.  This month's CPI announcement specifically mentions a small rise in both energy and food prices, but not enough to merit concern about inflation at this time. 

Some people fear that current U.S. low interest rate monetary policies, along with federal budget deficits, will eventually result in pressure on prices, but few suggest that any inflation problem is eminent.

Take a look at the BLS CPI announcement for the month of September for the most recent price level data.

U.S. Bureau of Labor Statistics: Consumer Price Index - September 2010

Released October 15, 2010

"The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.1 percent before seasonal adjustment."

The September price data seems to confirm that inflation has not been a problem in the U.S., with a rise of just 1.1 percent over the past year.  Again, gasoline and food prices were singled out as contributors to the small price level rise.  Read on.

"Increases in food indexes and another rise in the gasoline index contributed to the all items seasonally adjusted increase this month. Four of the six major grocery store food group indexes increased in September as the food index posted its largest increase since October 2008. The gasoline index rose again in September, leading to a third consecutive increase in the energy index despite a decline in the index for household energy."

The "core' rate of inflation, less energy and food, showed even more price stability. The BLS summarized the sectors that increased and those that decreased in September.

"The index for all items less food and energy was unchanged in September, as it was in August. The shelter index was unchanged for the second month in a row. The indexes for apparel, household furnishing and operations, recreation, and used cars and trucks all declined in September, offsetting a sharp increase in the index for medical care and a slight increase in the index for new vehicles."

"Over the last 12 months, the index for all items less food and energy rose 0.8 percent, the lowest 12-month increase since March 1961, with the shelter component down 0.4 percent. The food index rose 1.4 percent, with both the food at home index and food away from home index rising the same 1.4 percent. The energy index rose 3.8 percent over the last year, with gasoline up 5.1 percent."

Gasoline prices are up, but not near their highs of recent years.  Medical care costs continue to rise, as they have over the past several years.   Take a look at some details about the key spending categories.

[Note:  For more information about the "core" rate of inflation, see the BLS Frequently Asked Questions" page .  Students can discuss the pros and cons of the reported CPI-U and the "core" rate as reliable measures of inflation.]

Consumer Price Index Data for September 2010


"The food index rose 0.3 percent in September after a 0.2 percent increase in August. Both the food away from home and the food at home index increased 0.3 percent. Within the latter group, four of the six major grocery store food groups posted increases, with the other two unchanged. The index for meats, poultry, fish, and eggs rose the most, increasing 0.9 percent after declining in August. Within that group, the eggs index rose 7.2 percent. The index for cereals and bakery products rose 0.8 percent in September after a 0.1 percent increase in August. The indexes for dairy and related products and for fruits and vegetables posted slight increases in September, while the indexes for nonalcoholic beverages and for other food at home were unchanged. Over the past year, the indexes for cereals and bakery products and for nonalcoholic beverages have declined, while the indexes for the other four groups have increased."

Have you noticed the increases in food prices?  Ask those who do the grocery shopping in your household if they have noticed higher food prices.

[Note: Have your students noticed changes in food prices - either in grocery stores or restaurants?  It may be interesting to look at the history of prices in this category.  See Table 2 .]

[Note to teacher: In November, 2007, the BLS published an interesting report on Thanksgiving Food Prices - at home and away from home .  The report also mentions other Thanksgiving Day activities, such as time spent watching football games.]


"The energy index rose 0.7 percent in September after a 2.3 percent increase in August. Following a 3.9 percent increase in August, the gasoline index rose 1.6 percent in September. (Before seasonal adjustment, gasoline prices fell 1.4 percent in September.) In contrast, the household energy index declined in September, falling 0.6 percent, primarily due to a 2.3 percent decrease in the index for natural gas. The electricity index also declined, falling 0.3 percent, while the fuel oil index rose 0.8 percent. The indexes of all the major energy components have risen over the last 12 months."

You may have noticed the recent rise in gasoline prices.  Note, though, that on a seasonally adjusted basis, gas prices fell in September.  The increase was not as great as usual during this time period. 

[Note to teacher:  Assign a category of spending to individuals or small groups of students ,  They can access BLS data to research the history of prices for the category.    The individuals or small groups can write a summary and report to the class.  It will be interesting to see how they try to explain the reasons for price changes over time.  Some categories, such as apparel or household furnishings may be difficult to explain. ]

More September Price Level Details

"All items less food and energy The index for all items less food and energy was unchanged in September, as it was in August.

The shelter index was unchanged for the second month in a row. The rent index rose 0.1 percent while the index for owners' equivalent rent was unchanged and the index for lodging away from home fell 0.2 percent.

The medical care index rose sharply in September, increasing 0.6 percent. The index for medical care commodities rose 0.3 percent while the index for medical care services increased 0.8 percent with the hospital services index rising 1.8 percent.

The index for new vehicles posted a slight increase in September, rising 0.1 percent, while the index for airline fares increased 0.2 percent. Offsetting these increases was a downturn in the index for used cars and trucks and continuing declines in several indexes. The used cars and trucks index fell 0.7 percent in September, its first decline since April 2009.

The apparel index decreased 0.6 percent following a 0.1 percent decline last month.

[Note to teacher:  BLS report on the apparel manufacturing industry , including apparel prices.]

The index for household furnishings and operations fell 0.4 percent in September and has now declined in three of the last four months.

The recreation index decreased 0.3 percent in September, its third consecutive decline."

[Note to teacher:  For a simple visual representation of the price changes for different categories of spending in September, 2010, go to this BLS site, "Consumer Prices in September" .]

Figure 1, below, shows the "Percent Change in the CPI, All Urban Consumers, U.S. City Average, September  2010."  Note the spending categories that increased and decreased in September.

Figure 1:  Changes in CPI All Urban Consumers
U.S. City Average
September 2010
(Seasonally Adjusted)

12 months
All Items 0.1 1.1
   Food 0.3 1.4
   Food at home 0.3 1.4
   Food away from home 0.3 1.4
   Energy 0.7 3.8
   Energy commodities 1.8 5.8
   Gasoline 1.6 5.1
   Fuel Oil 0.8 11.8
   Energy services -0.8 1.5
   Electricity -0.3 1.1
All Items Less Food & Energy 0 0.8
   New vehicles 0.1 2.1
   Used cars and trucks -0.7 12.9
   Apparel -0.6 -1.2
   Medical care commodities 0.3 2.6
   Shelter 0 -0.4
   Transportation services 0.3 3.0
   Medical care services 0.8 3.7


Not seasonally adjusted CPI measures

"The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.1 percent over the last 12 months to an index level of 218.439 (1982-84=100). For the month, the index rose 0.1 percent prior to seasonal adjustment."

If your are an average U.S. urban family, the cost of your market basket of goods and services that cost you $215.97 in September of 2009, cost you an additional 1.1 percent in September 2010 -  up to $218.44.  Is a $2.47 increase over one year significant to your family?  Did your family income rise as much as this?  If yes, you may be okay.  If not, your purchasing power has declined.

"The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 1.4 percent over the last 12 months to an index level of 214.306 (1982-84=100). For the month, the index was unchanged prior to seasonal adjustment."

"The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 0.9 percent over the last 12 months. For the month, the index rose 0.1 percent on a not seasonally adjusted basis."

The "chained" index, adjusted for inflation, increased less than the unadjusted index.  The low rate of inflation has reduced the impact of the market basket price level change.

Consumer Price Index for All Urban Consumers (CPI-U)

The all urban consumer group represents about 87 percent of the total U.S. population. It is based on the expenditures of almost all residents of urban or metropolitan areas, including professionals, the self-employed, the poor, the unemployed, and retired people, as well as urban wage earners and clerical workers. The CPI for All Urban Consumers (CPI-U) is the index most often reported by the national media.

Figure 2 CPI

Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is based on the expenditures of households included in the CPI-U definition that also meet two requirements: more than one-half of the household's income must come from clerical or wage occupations, and at least one of the household's earners must have been employed for at least 37 weeks during the previous 12 months. The CPI-W population represents about 32 percent of the total U.S. population and is a subset, or part, of the CPI-U population. The CPI for Urban Wage Earners and Clerical Workers (CPI-W) is the index most often used for wage escalation agreements.

The CPI inflation calculator allows customers to calculate the value of current dollars in an earlier period, or to calculate the current value of dollar amounts from years ago.

Consumer price indexes often are used to escalate or adjust payments for rents, wages, alimony, child support and other obligations that may be affected by changes in the cost of living. The BLS has published a fact sheet explaining how to use the CPI for escalating contracts.

Chained Consumer Price Index for All Urban Consumers (C-CPI-U)

The C-CPI-U supplements the other two CPI indexes. The C-CPI-U is designed to more closely resemble a true "cost-of-living index" by taking into account observed consumer behavior, technological changes, and product substitutions. The C-CPI-U is chained monthly, using expenditure data to average price changes across item categories between a base period (1999, initially) and the current period. Data are national, not seasonally adjusted, and subject to revision.

The CPI may not be applicable to all population groups. For example, the CPI-U is designed to measure inflation for the U.S. urban population and thus may not accurately reflect the experience of people living in rural areas. Also, the CPI does not produce official estimates for the rate of inflation experienced by subgroups of the population, such as the elderly or the poor.

The CPI, Inflation and the Cost of Living

A BLS online publication, "Frequently Asked Questions: Is the CPI a Cost-of-Living Index? ," explains the relationship of the CPI to inflation and the cost of living.

"The CPI is the most widely used measure of inflation and is sometimes viewed as an indicator of the effectiveness of government economic policy. It provides information about price changes in the Nation's economy to government, business, labor, and private citizens and is used by them as a guide to making economic decisions. In addition, the President, Congress, and the Federal Reserve Board use trends in the CPI to aid in formulating fiscal and monetary policies."

"The CPI frequently is called a cost-of-living index, but it differs in important ways from a complete cost-of-living measure. BLS has for some time used a cost-of-living framework in making practical decisions about questions that arise in constructing the CPI. A cost-of-living index is a conceptual measurement goal, however, and not a straightforward alternative to the CPI. A cost-of-living index would measure changes over time in the amount that consumers need to spend to reach a certain utility level or standard of living.

Both the CPI and a cost-of-living index would reflect changes in the prices of goods and services, such as food and clothing, that are directly purchased in the marketplace; but a complete cost-of-living index would go beyond this role to also take into account changes in other governmental or environmental factors that affect consumers' well-being. It is very difficult to determine the proper treatment of public goods, such as safety and education, and other broad concerns, such as health, water quality, and crime, that would constitute a complete cost-of-living framework."

[Note to teachers: The "Virtual Economics" CD includes a basic explanation of "inflation" through a video clip. If you have a copy of "Virtual Economics," open the "Browse Economics Concepts" section and click on the key word "inflation" in the macroeconomics section.]

The "Core" Rate of Inflation and the "Headline" Rate

"The 'core' CPI measurement represents changes in the consumer price index minus items which typically fluctuate widely from month to month - food and energy.  From the January 19 BLS announcement: " The index for all items less food and energy fell 0.1 percent in January. This decline was largely the result of decreases in the indexes for shelter, new vehicles, and airline fares." 

Extra attention is given by forecasters to the core index as it tends to show more lasting trends in prices. The rates of change in the core index were higher in the early part of the year and that did cause concern about the trend in inflation. The concern was that the increase in energy prices over the last several years may have started to influence rates of increases in all other prices. While that concern still exists, core prices are increasing at relatively slower rates.

The "headline" rate - the rate reported in the media includes energy and food. Adding the more volatile energy and food prices often shows greater rates of change. In some cases, a drop in energy prices added to inflation in other categories will end up showing a net "no change."

Calculating the Rate of Inflation Over a Period of Time

The CPI Inflation Calculator allows customers to calculate the value of current dollars in an earlier period, or to calculate the current value of dollar amounts from years ago. The CPI inflation calculator uses the average Consumer Price Index for a given calendar year. This data represents changes in prices of all goods and services purchased for consumption by urban households. This index value has been calculated every year since 1913. For the current year, the latest monthly index value is used.

The BLS has published an online reading, "The Consumer Price Index —Why the Published Averages Don't Always Match An Individual's Inflation Experience ." This may answer some of your questions about your experiences with price level changes.

For additional BLS information about the CPI: 


Short Answer Question

1. How does inflation impact your life?

[Students should be able to connect their spending patterns to price level changes. One common comment should be about gasoline prices over the past year. Students may also commonly comment on changes in the prices of apparel and entertainment. They should use the terminology of the CPI (as found in this lesson) accurately.]


To review, the BLS reported that the "Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in September on a seasonally adjusted basis...Over the last 12 months, the all items index increased 1.1 percent before seasonal adjustment."

An October 15, 2010, New York times article by Sewell Chan, “Bernanke Signals Intent to Further Spur Economy,” ( reported on a speech by Federal Reserve chairman Ben S. Bernanke to a meeting of economists.  Bernanke commented on the Fed’s sometimes conflicting mandates to promote maximum employment and price stability. Bernanke said that current rate of inflation was “too low” by the historically standard of the desired rate of “about 2 percent or a bit below,” and that the unemployment rate was “clearly too high.”

Do we need a little inflation?

Some economists and policy makers suggest that some inflation, fueled by either strong consumer demand (demand pull) or increased demand for productive resources (cost push), is a positive sign of growth of the economy.  Deflation, on the other hand, may dampen the economy and result in a downward spiral.

The good news is that prices are stable and consumers are not struggling to pay higher prices. 

The bad news is that prices are stable (if not decreasing) and and the economy is not strong enough to create jobs.


The BLS provides more detailed information about how price level changes are measured for different demographic groups, sectors, and specific product groups.

One resource that may be of interest to students is the BLS online publication, "How BLS Measures Price Change for College Tuition and Fees in the Consumer Price Index."

Take a look at the reading. Link:

How might the prospect of inflation impact your post-high school plans - working or more education?