Types of Consumer Price Index
There are four main categories of Consumer Price Index (CPI), organized by their scope and methodology: Headline CPI, Core CPI, Food CPI, and Shelter CPI.
Main Categories
- Headline CPI — measures the total change in prices of a basket of goods and services consumed by households, including volatile items like food and energy, as seen in the US Bureau of Labor Statistics' (BLS) CPI for All Urban Consumers, which includes data on the prices of over 80,000 items.
- Core CPI — excludes prices of food and energy to better capture the underlying inflation trend, as calculated by the European Central Bank, which uses a Harmonized Index of Consumer Prices (HICP) excluding energy and food.
- Food CPI — tracks the change in prices of food items only, such as the USDA's Food Price Index, which monitors the prices of over 200 food items, including beef, poultry, and dairy products, with Tyson Foods being a major player in the US meat market, producing ~25% of the country's beef (National Cattlemen's Beef Association).
- Shelter CPI — focuses on the prices of housing-related items, such as rent, utilities, and furniture, as seen in the Canadian CPI's shelter component, which accounts for approximately 27% of the overall CPI basket, with CMHC (Canada Mortgage and Housing Corporation) providing data on Canadian housing market trends.
Comparison Table
| Category | Scope | Methodology | Frequency |
|---|---|---|---|
| Headline CPI | Total consumption | Fixed basket | Monthly |
| Core CPI | Non-volatile consumption | Exclusion of food and energy | Monthly |
| Food CPI | Food items only | Variable basket | Monthly |
| Shelter CPI | Housing-related items | Fixed basket | Monthly |
How They Relate
The categories overlap and feed into each other, as Headline CPI includes Food CPI and Shelter CPI, while Core CPI excludes Food CPI. Specifically, Headline CPI and Core CPI are often confused, but the latter provides a clearer picture of underlying inflation by excluding volatile items. The Food CPI and Shelter CPI are commonly used to analyze specific sectors of the economy, such as the impact of droughts on food prices or the effect of housing market trends on Shelter CPI, with Freddie Mac providing data on US housing market trends. Additionally, the US Bureau of Labor Statistics (BLS) calculates both Headline CPI and Core CPI, while the International Monetary Fund (IMF) uses Core CPI to monitor inflation trends in member countries, with Ricardo's comparative advantage model providing a framework for understanding international trade and its impact on prices.