Consumer Price Index Update

As part of this blog, I will closely be following the Consumer Price Index (CPI) and monitoring consumer confidence. This is important because if people are not comfortable spending money, demand will go down, causing companies to produce less and make budget cuts, which will increase the unemployment rate. All of this combined will slow down the economy, and it stems from consumer confidence. 

As defined by the Bureau of Labor Statistics, Consumer Price Index (CPI) is "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services." The Bureau of Labor Statistics has deemed 1,967 goods make up this basket, ranging from apparel to transportation to education. The CPI is the most widely used indicator for inflation and is sometimes looked at to determine the success of a president's economic policy.

According to the most recent report from the Bureau of Labor Statistics, the CPI has increased by 1.7% since last August. This means that consumers are more confident with the state of the economy and are spending more money on goods. It could also mean that President Obama's economic policy is working, even if it is working slowly.

The Wall Street Journal published an article this past Thursday which showed a gain in the housing market, the highest jump seen in two years. Not only are more people buying homes, but they are also looking to build and renovate homes as well. In August, 535,000 construction projects began, helping to get people back to work. Overall, housing starts were up 2.3% and sales on homes were up 9.3% from last year. The housing industry is part of the market basket measure by the CPI. This article shows that people are more willing to spend money on real estate, which will continue to increase the CPI's percentage as well as our overall economic standing.