What's Counted
The index is a three-digit number based on prices for a “market basket” of 300 goods and services, ranging from cereal to root canals. The inflation rate is the percentage change in the index. The Federal Reserve looks at the core measure—which excludes volatile food and energy prices—when figuring out if inflation is too high. If only consumers had that luxury.

The Data
The Bureau of Labor Statistics gathers information from numerous surveys to produce the Consumer Price Index. It tracks 80,000 prices from about 25,000 stores and service ­providers each month. The Consumer Expenditure Survey, conducted by the Census Bureau, requires some participants to keep a two-week spending diary.

History
Between 1916 and 1918, prices rose more than 60 percent, a change so dramatic that it spurred the government to begin tracking inflation. In 1918, the Bureau of Labor Statistics was allocated $75,000 (about $1 million in today’s dollars) to survey family spending in 18 shipbuilding centers. A year later, the bureau published its first cost-of-living study.

How It’s Used
The Social Security Administration uses the Consumer Price Index to help calculate cost-of-living adjustments annually, and the ­Department of Agri­culture factors the index information into programs like food stamps. The Fed becomes concerned about inflation—and thinks about raising interest rates—when the core inflation rate rises above 2 percent.  

The Irony
The budget of the Bureau of Labor Statistics, which publishes the ­Consumer Price Index, hasn’t kept up with inflation. Since 2003, the bureau’s budget is up 11.4 percent, whereas consumer prices jumped roughly 13 percent over the same period. 

Edging Up
The index has been rising at a rate of about 4.5 percent for the year. 

Off the Charts

The record-setting year for inflation in the U.S. was 1918, when World War I scarcities caused the Consumer Price Index to jump 20.4 percent. In recent decades, the index has risen more slowly. The most inflationary years of the past decade were 2000 and 2005, both of which saw a 3.4 percent gain. As of July, this year was poised to top that.

 
Adding to the Basket
Years in which the index first included these items:

• 1940    Automobiles
• 1951    Frozen foods, TVs
• 1963    Airline fares, clothes dryers
• 1978    Microwave ovens
• 1987    VCRs, personal computers
• 1998    DVDs, cell phones, Viagra