FIN 2022-07-25 Handout Distributed at Meeting - Consumer Price Index (CPI) Discussion

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City of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: Finance and Governance Committee FROM: Vicky Carlsen, Finance Director CC: Mayor Ekberg DATE: July 25, 2022 SUBJECT: Consumer Price Index Discussion ISSUE Provide background information on the Consumer Price Index (CPI) and the effects of inflation on households and the City. It is difficult to find local information from the early 1980's but is provided when possible. DISCUSSION Consumer Price Index (CPI) CPI is the consumer price index that measures the average change in prices over time that consumers pay for goods and services. It is a fixed set of products and services whose price is evaluated on a regular basis and is used to track inflation. Items tracked and evaluated include basic food like cereal, milk, and coffee as well as housing costs, furniture, clothing, transportation, and medical care. The goods and services tracked reflect the spending habits of two population groups. It includes urban wage earners and clerical workers, and these two groups represent about 93% of the total US population. Populations that are not tracked are people living in rural and agricultural households, the military, and people living in institutions like prisons. CPI is the average change, which means that some goods and services show a year over year increase above CPI and others increased at a lower rate. On July 13th, we were notified that CPI was 9.5%. The last time CPI was this high was in 1981. What follows below is a discussion of the effects of CPI today compared to how CPI affects households and the City the last time CPI was this high. Not only is CPI much higher than in the past, but the 12 -month change in many categories that effect residents, businesses, and the City have increased sharply in the last 12 months. The graph on the next page shows selected expenditure categories and the 12 - month change.