The Consumer Price Index is an economic indicator of price changes but it depends on what's important in household spending Prices of goods and services change every now and then. Some may increase because of rises in production costs or as a result of great demand; others may drop.
For some products - fresh vegetables, for example - prices fluctuate with weather conditions. The phenomenon of prices being generally on the rise is known as inflation.
The Consumer Price Index (CPI) is an important economic indicator that summarises price changes affecting households and is widely used as a measure of inflation.
Specifically, it measures changes in the total cost of a 'fixed basket' of goods and services.
The extent to which price movements of different goods and services affect households varies, depending on the relative importance of those goods and services in household expenditure.
For example, a commodity which only accounts for a very small proportion of household expenditure has little effect on the CPI even though its price may have gone up significantly.