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Economic Snapshot

Thursday, April 1, 1999

1st Quarter 1999

Q2-98 Q3-98 Q4-98 Q1-99
Growth Rate—Real Gross Domestic Product 1.8% 3.7% 6.0% 4.5%*
Inflation Rate—Consumer Price Index 1.8% 1.6% 1.7% 1.5%
Civilian Unemployment Rate 4.4% 4.5% 4.4% 4.3%

*Advance estimate

SOURCE: Report on Economic Activity (Board Report), April 1999, Page 9.

What is the CPI?

The Consumer Price Index (CPI) is a measure of the average change over time in price paid by urban consumers for a fixed market basket of consumer goods and services. The CPI provides a way for consumers to compare what the market basket of goods and services costs this month with what the same market basket cost a month or a year ago.

Prices for the goods and services used to calculate the index are collected in 85 urban areas throughout the country and from about 21,000 retail and service establishments—supermarkets, department stores, gasoline stations, hospitals, etc. The CPI does not include investment items, such as stocks, bonds, real estate and life insurance, since these relate to savings and not day-to-day living expenses.

Why was the CPI created?

The Consumer Price Index began during World War I when rapid increases in prices, especially shipbuilding, made such an index essential for calculating cost-of-living adjustments in wages. Between 1917-19, studies of family expenditures were conducted in 92 industrial centers. Periodic collection of prices was started, and, in 1919, the Bureau of Labor Statistics (BLS) began publishing separate indexes for 32 cities. In 1921, the BLS began publishing a national index with indexes estimated back to 1913. Since its inception, the CPI has undergone numerous revisions, including geographic areas, items selected for pricing and establishments in which items are priced, to reflect changes in people's buying habits.