Male voice: What I want to do in this video
is explore what the actual basket of goods
looks like for the consumer price index.
We had a ridiculously simple example in the last video.
Right over here, this is a table I got, this is from
a press release issued by the Bureau of Labor Statistics.
If you do a search for a CPI or a CPI-U
in Bureau of Labor Statistics, you should find
the press release where they issue the CPI.
This is the first table in that press release.
They say the Consumer Price Index for all urban
consumers, and just like we talked about in
the last video, when people talk about the CPI Index,
they're really talking about, or they tend
to be talking about, the CPI-U. The CPI for urban
consumers because most consumers fall under this category.
U.S. city average by expenditure category
and commodity and service group.
Then they define their base year.
The base year, actually they have a range,
maybe I guess they take an average between 1982 and 1984.
They say that is 100 unless otherwise noted.
What they do in this first column,
so these are the different buckets that people
spend, that the urban consumer might spend
some of their money on. This is saying
the basket of goods we're giving a weighting.
About a little under 15% is spent on food
and beverages. Then they break down that 15%,
so 13% is on food and then they even break it out
between 7% or a little under 8% is food at home.
Then they break it out between cereals, meats,
dairy and related products, fruits and vegetables.
The average, based on the way the basket looks,
it looks like they're spending about the same amount
on fruits and vegetables as they're spending
on alcohol. They're spending significantly less on ...
Well, I don't know if that's a good trend right
over there, but that's why this is interesting to look at,
because this is viewed as a typical basket
of goods for your average urban consumer.
You can see they're spending a little bit more
on meats, poultry and fish. You can see the breakdown.
Then you could keep breaking it down.
They're spending 41%, the basket of goods,
on housing, and they even break that up in terms
of some of it is your primary, some of it is your
general shelter, then there's stuff like
fuels and utilities. That's encapsulated in
your housing, you're going to have to heat your home
and whatever else. Then your furniture, 4% or 4.4%
is spent on furniture. We could keep going down.
This is pretty interesting to look at.
The basket of goods, so this is viewed as the typical
urban consumer spending 3.6% on apparel,
17% on transportation, 6.6% on medical care,
and almost a similar amount on recreation.
A similar amount on education. They keep breaking
it down into all of the different categories.
A little under 1% on tobacco and smoking products.
You might say,"Wait, most people these days
"in the U.S. don't smoke, but the ones who do
"spend way more than this." This is an average
of all of the people in the United States.
For example, if one out of ten people spent
10% of their income on tobacco and the other
people don't smoke at all, then you might get
on average, the average basket of goods, is about 1%.
They keep breaking it down into other things.
All of these weightings combined, they will
add to 100. That is the entire basket of goods.
Now what they do, this is their weighting.
This column right over here essentially gives
us the weighting as of December 2010.
That's going to change as people's habits change,
or as new goods and services emerge on the market,
or frankly even as prices change, that will change.
But you have to some weighting in which
to take a weight of the price changes,
or to weight the average percent changes.
They told us that unless otherwise noted,
our base year is going to be 100.
Relative to that base year, they then give us
the prices, the price indices for each
of these buckets in November 2011, and then
December 2011. Then they're going to actually
figure out the unadjusted percent change
to December 2011 from. This is year over year,
from December of the previous year, and this
is from the previous month. You can see
the change from the previous year is much
larger than the change from the previous month.
One way to look at this, this is saying
in November 2011, food and beverages, on average,
were about 2.3 times more expensive than they were
between 1982 and 1984. December 2012, sorry,
December 2011, they were about 2.31 times
more expensive than they were in 1982-1984.
Just as an extra kind of data point, they
actually give us this one little line here.
If we set 1967 as the base year, then all items,
if we use the default base year of 1982-1984,
in November 2011 all items were about 2.26 times
as expensive as they were in 1982-1984.
But if we use 1967 as our base year,
now it's 6.77 times as expensive.
Remember, the base year is equal to 100.
This is 6.77 times as expensive as they were
in 1967. You could go down all of the categories
to essentially see these are all relative
to 1982-1984, so you can see how much things
have gotten more expensive. It's interesting.
Things like furniture have not gotten that much
more expensive relative to the early '80s.
In fact, there are some categories that have even
gotten cheaper. For example, new and used motor vehicles.
It hasn't changed much at all since, based on at least
this weighting, and they do all these adjustments
based on the quality of the car. You might say,
"Wait, I'm spending more on my car than I did in 1982,"
but they're making adjustments based on your car
being that much better and all of that.
It's not exactly an apples to apples comparison.
But you could see that based on those adjustments,
it doesn't look like it's changed much.
Things like medical care have gotten a lot
more expensive since the early '80s; four times
as expensive, you see right over there.
Video and audio has gotten cheaper.
Recreation in general has not gotten that much
more expensive. Information and information
processing has gotten cheaper. Telephone
service has not gotten that much more expensive.
Communication has gotten cheaper.
I don't know if you were around in the early '80s,
but actually the cost to call someone long distance
has gone down dramatically. Even, see, personal
computers, they have gotten cheaper.
Once again, like the cars, there's an adjustment
for essentially ... They don't do it directly
because obviously computers have gotten
orders of magnitude more powerful,
but they have gotten on cheaper average,
and they have gotten much, much more powerful.
This is fun to look at. You can see, looking
right over here. Tobacco and smoking products
have become dramatically more expensive.
You have more and more jurisdictions that are,
for the most part, taxing it or whatever.
They're making it harder and harder to buy.
You see things like ... It's just fun to look at.
Dig around here. Medical, oh, we already
looked at this. This is the overview services,
durables. A lot of these things are in this
one to two to three price range.
The stuff like medicine, tobacco, much more expensive.
Things like computers, communications, much cheaper.
Then as we mentioned before, this measures
the percent change to December 2011 from the previous year.
That's why it gives you a year over year number.
This is from the previous month.
These are seasonally adjusted changes.
If we have time in another video, I'll talk about
how you can calculate, or I'll do a simple
example, of seasonally adjusting things.