Inside the Consumer Price Index: January 2025

Inflation affects everything from grocery bills to rent, making the Consumer Price Index one of the most closely watched economic indicators. What does inflation mean at the micro level — specifically to your household?

The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U, which we'll refer to hereafter as the CPI. The BLS weighs these annually with the latest weighting taking place in December 2024.

CPI component weights

The categories in the pie chart are listed in the same order as the BLS tables, not by their relative size in the index. The first three follow the traditional order of urgency: food, shelter, and clothing, which account for over 60% of the index. Transportation comes before Medical Care, and Recreation precedes the lumped category of Education and Communication. Other Goods and Services refers to a bizarre grab-bag of odd fellows, including tobacco, cosmetics, financial services, and funeral expenses. For a complete breakdown and relative weights of all the subcategories of the eight categories, here is a useful link.

CPI Component Growth

The chart below shows the cumulative percent change in price for each of the eight categories since 2000.

CPI Categories Growth since 2000

Not surprisingly, Medical Care and Housing have been the fastest-growing categories, growing more than 100% since the turn of the century. At the opposite end is Apparel, which has shrunk just over 1% since 2000. Another unique feature of Apparel is the obvious seasonal volatility of the contour line.

Transportation is the other category with high volatility — much more dramatic and irregular than the seasonality of Apparel. Transportation includes a wide range of subcategories, such as motor vehicles, fuel, parts/equipment, maintenance/repair, insurance, fees, airline fares, etc. The volatility is largely driven by the Motor Fuel subcategory. For a closer look at gasoline, see this chart in our weekly gasoline update.