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       Brief Explanation of the CPI
  
          The Consumer Price Index (CPI) is a measure of the
       average change in prices over time in a market basket of
       goods and services.  The Bureau of Labor Statistics
       publishes CPIs for two population groups:  (1) a CPI for All
       Urban Consumers (CPI-U) which covers approximately 87
       percent of the total population and (2) a CPI for Urban Wage
       Earners and Clerical Workers (CPI-W) which covers 32 percent
       of the total population.  The CPI-U includes, in addition to
       wage earners and clerical workers, groups such as
       professional, managerial, and technical workers, the self-
       employed, short-term workers, the unemployed, and retirees
       and others not in the labor force.
       
            The CPI is based on prices of food, clothing, shelter,
       and fuels, transportation fares, charges for doctors' and
       dentists' services, drugs, and other goods and services that
       people buy for day-to-day living.  Prices are collected in
       87 urban areas across the country from about 50,000 housing
       units and approximately 23,000 retail establishments-
       department stores, supermarkets, hospitals, filling
       stations, and other types of stores and service
       establishments.  All taxes directly associated with the
       purchase and use of items are included in the index.  Prices
       of fuels and a few other items are obtained every month in
       all 87 locations.  Prices of most other commodities and
       services are collected every month in the three largest
       geographic areas and every other month in other areas.
       Prices of most goods and services are obtained by personal
       visits or telephone calls of the Bureau's trained
       representatives.
       
            In calculating the index, price changes for the various
       items in each location are averaged together with weights,
       which represent their importance in the spending of the
       appropriate population group.  Local data are then combined
       to obtain a U.S. city average.  Separate indexes are also
       published by size of city, by region of the country, for
       cross-classifications of regions and population-size
       classes, and for 26 local areas.  Area indexes do not
       measure differences in the level of prices among cities,
       they only measure the average change in prices for each area
       since the base period.
       
            The index measures price change from a designed
       reference date-1982-84 which equals 100.0.  An increase of
       16.5 percent, for example, is shown as 116.5.  This change
       can also be expressed in dollars as follows:  the price of a
       base period market basket of goods and services in the CPI
       has risen from $10 in 1982-84 to $11.65.
       
            For further details visit the CPI home page on the
       Internet at http://stats.bls.gov/cpihome.htm or contact our
       CPI Information and Analysis Section on (202) 691-7000.
       
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       Calculating Index Changes
       
            Movements of the indexes from one month to another are
       usually expressed as percent changes rather than changes in index 
       points, because index point changes are affected by the level of 
       the index in relation to its base period while percent changes are 
       not.  The example below illustrates the computation of index point 
       and percent changes.
       
            Percent changes for 3-month and 6-month periods are expressed 
       as annual rates and are computed according to the standard formula 
       for compound growth rates.  These data indicate what the percent 
       change would be if the current rate were maintained for a 12-month 
       period.
       
         
                    Index Point Change
       
       CPI   					115.7
       Less previous index    			111.2
       Equals index point change  		4.5
       
       
                    Percent Change
       
       Index point difference			4.5
       Divided by the previous index		111.2
       Equals					0.040
       Results multiplied by one hundred	0.040 x 100
       Equals percent change			4.0