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Handbook of Methods Consumer Price Index History

Consumer Price Index: History

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers for a representative basket of consumer goods and services. The CPI measures inflation as experienced by consumers in their day-to-day living expenses. The CPI is used to adjust income eligibility levels for government assistance, federal tax brackets, federally mandated cost of living increases, private sector wage and salary increases, and consumer and commercial rent escalations. Consequently, the CPI directly affects hundreds of millions of Americans.

The "food price index" evolved into what we now call the Consumer Price Index (CPI). During World War I, rapid increases in prices, particularly in shipbuilding centers, made a more comprehensive index essential for calculating cost-of-living adjustments in wages. Studies of family expenditures were conducted in 92 industrial centers in 1917–19 in order to provide appropriate weighting patterns for the index. Periodic collection of prices was started and, in 1919, the Bureau of Labor Statistics (BLS) began publication of separate consumer price indexes for 32 cities. Regular publication of a national index, the U.S. city average, began in 1921, and indexes were estimated back to 1913.

Since its inception, the CPI has been comprehensively revised on several occasions to implement the following: updated samples and weights, expanded coverage, and enhanced methodologies. The improvements introduced over the years have reflected not only the Bureau's own experience and research, but also the criticisms and investigations of outside researchers.^⁠1

Hover over the red dot to see historical information.

Key developments

1913: First year official retail price data are available

In 1919 data were estimated back to 1913

1919: Began publication of separate indexes for 32 cities

Collected prices in central cities periodically
BLS used a 1917–19 study on family expenditures in 92 industrial centers to develop weights reflecting the relative importance of goods and services purchased by consumers.
Collected prices for major groups: food, clothing, rent, fuels, house furnishings, and miscellaneous
Limited pricing to items selected in advance to represent their categories

1921: Began regular publication of a national index, the U.S. city average, based on an unweighted average of the city indexes

Estimated the U.S. city average back to 1913, using food prices only

1940: The first comprehensive revision of the CPI

Used weights based on a 1934–36 study of consumer expenditures
Collected prices in the 34 largest U.S. cities
Implemented a weighted average of cities for the U.S. city average indexes

1942–43: Improvements made during World War II

Discontinued the pricing of unavailable items, such as new cars and household appliances
Increased the weight of other items, including automobile repair and public transportation

1950: Weight updates and new items added

Adjusted weights in seven cities, using a 1947–49 survey of consumer expenditures
Adjusted weights based on the 1950 Census
Adjusted rent index to remove “new unit bias” caused by rent control
Added new items to the list of covered items, including frozen foods and televisions

1953: The second comprehensive revision

Used weights based on a 1950 survey of consumer expenditures conducted in central cities and attached urbanized areas
Added a sample of medium and small cities
Updated the list of items that the index covered, adding restaurant meals
Expanded the sample of rental units and added homeownership costs and improved pricing and calculation methods

1964: The third comprehensive revision

Based weights on a 1960–61 survey of consumer expenditures in metropolitan areas
Added single-person households to the target population: urban wage earner and clerical worker households
Extended price collection of goods and services to the suburbs of sampled metropolitan areas
Updated the sample of cities, goods and services, and retail stores and service establishments

1966: Made quality adjustments for new vehicles at model changeover

1967: Improved treatment of seasonal items

1978: The fourth comprehensive revision

Added a new Consumer Price Index: the CPI for All Urban Consumers, or the CPI-U
Changed the name of the older CPI to the CPI for Urban Wage Earners and Clerical Workers, or the CPI-W
Based weights on a 1972–73 survey of consumer expenditures and the 1970 census
Expanded the sample to 85 areas (primary sampling units)
Increased minimum frequency for obtaining the prices of goods and services (known as “pricing”) from quarterly to bi-monthly
Implemented monthly pricing in the five largest areas
Introduced probability sampling methods at all stages of CPI sampling
Introduced checklists that define each category of spending to clarify what is included or excluded from an item (See appendix 2.)
Developed estimates of the CPI’s sampling error and optimal sample allocation to minimize that error
Began systematic replacement of retail outlets and their item samples between major revisions
- Implemented a point-of-purchase survey (POPS)
- Selected retail outlets with probability proportional to consumer spending therein
Eliminated reliance on outdated secondary-source sampling frames
Began rotating outlet samples every 5 years
Began rotating one-fifth of the CPI pricing areas each year

1987: The fifth comprehensive revision

Based weights on the 1982–84 Consumer Expenditure Survey and the 1980 Census
Updated samples of items, outlets, and areas
Began rotating item samples every 5 years
Redesigned the CPI housing survey
Improved sampling, data collection, data processing, and statistical estimation methods
Initiated more efficient sample design and sample allocation
Introduced techniques to make CPI production and calculation more efficient
Introduced rental equivalence concept in January 1983 for the CPI-U and in January 1985 for the CPI-W (Additional information on rental equivalence is available in a factsheet.)

1988: Improved housing estimator to account for aging of the sample housing units

1992: Improved the handling of new models of vehicles and other goods

1994: Improved seasonal adjustment methods

1995: Implemented new sample procedures to prevent overweighting items whose prices are likely to rise

1997: Changes made to hospital services

Initiated a single hospital services item stratum with a treatment-oriented item definition
Discontinued pricing of the inputs to hospital services

1998: The sixth comprehensive revision

Based weights on the 1993–95 Consumer Expenditure Survey and the 1990 census
Updated geographic and housing samples
Extensively revised item classification system
Implemented new housing index estimation system
Used computer-assisted data collection
Added the Telephone Point-of-Purchase Survey (TPOPS) which allows rotation of outlet and item samples by item category and geographic area, rather than by area alone (this survey was previously conducted in person)

1999: Developed the Consumer Price Index research series

Developed the Consumer Price Index Research Series, which is an estimate of the CPI for all Urban Consumers (CPI-U) from 1978 to present that incorporates most of the improvements made over that time span into the entire series

1999: Initiated a new housing survey based on the 1990 census

Initiated a new housing survey based on the 1990 census that estimated price change for owners’ equivalent rent directly from rents (an estimate of the implicit rent owner occupants would have to pay if they were renting their homes)

1999: Began using a geometric mean formula for most basic indexes

Began using a geometric mean formula for most basic indexes that mitigates lower level substitution bias and reflects shifts in consumer spending with item categories as relative price change

1999–2000: Expanded the use of hedonic regression in quality adjustment

2002: Addition of the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) and other changes

Implemented biennial weight updates
Implemented 4-year outlet rotation to replace 5-year scheme
Added the C-CPI-U in August
- Uses more advanced “superlative” index formula (the Törnqvist formula)
- Corrects upper-level substitution bias

2003: Directed replacement of sample items in the personal computer and other categories, to keep samples current

2004: Expanded collection of price data to all business days of the month

Expanded collection of price data to all business days of the month (Before 2004, prices were collected during the first 18 business days of the month for the first 10 months of the year and the first 15 business days for November and December.)

2007: Began publishing indexes to three decimal places (January)

2008: Added CPI-E and published it back to 1982

Congress mandated experimental consumer price index for older people (62 years of age and older)
CPI-E has limitations related to the expenditure weights, outlets sampled, items priced, and the prices collected

2010: Began a three-stage effort to improve the housing survey

First and second stages used the 2000 census
First stage was a 4-year sample augmentation with a goal of adding 16,000 units, mainly in neighborhoods with seriously depleted renter samples; this data was first used in the rent indexes for July 2010
Second stage was a sample replacement meant to replace the rental units introduced in 1999. The November 2012 CPI was the first that used a new sample from this stage and the May 2016 CPI was the first in which the housing survey sample was drawn entirely from the 2000 census.
The third stage was a regular replacement commencing in 2016 that will end in 2022. It will replace the 2000 census-based sample with one based on the American Community Survey using 2010 Decennial census geography. This stage will continue into the future and, for the first time, the CPI housing survey will have a process that keeps its sample continuously updated.

2018: Geographic revision

Introduced a new geographic sample based on the 2010 Census
Changed the publication frequency for several local area indexes
Established new local area and aggregate indexes
Introduced census division-level index data

2019: Changes to the CPI establishment frame

Replaced Telephone Point-of-Purchase Survey (TPOPS) as source of retail establishment frame with data from the Consumer Expenditure Surveys (CE)
Eliminates redundancies and inefficiencies in survey operations and reduces household burden
Use of Quarterly Census of Employment and Wages business registry to refine the location and address data from the CE

2020–2022: Expanded use of third-party data

Expanded the use of third-party data sources in the estimation of the CPI, including high-profile projects for gasoline and new vehicles data

2023: Implemented annual weight updates

For more on the history of the CPI and price change in the United States, see

^⁠1 For more on the history of the CPI and price change in the United States, see The first hundred years of the Consumer Price Index: a methodological and political history and One hundred years of price change: the Consumer Price Index and the American inflation experience.