Consumer Price Index (CPI)

The CPI measures the average change over time in the prices paid by urban consumers for a standard basket of goods and services, effectively serving as a key indicator for inflation.

Understanding inflation is vital because it affects the purchasing power of consumers and can erode savings if not counterbalanced by wage increases.

When CPI rises, each $ or £ or € can purchase fewer goods and services, which can strain individual budgets and prompt central banks to raise interest rates to contain inflation.

On the flip side, a falling CPI could indicate deflation, which carries its own set of economic challenges, such as decreased consumer spending.

Overall, inflation is closely watched by policymakers, businesses, and consumers alike, as it has wide-ranging implications for interest rates, economic policy, and the cost of living.

Recession Signal

Virtually all cases of where CPI goes over 5%, there is a recession, but we have had recessions where CPI is not over 5%.

Track this yourself

You can find the CPI YoY (year over year) on TradingView: https://www.tradingview.com/chart/v7ZG3yMA/?symbol=ECONOMICS%3AUSCCPI

Draw a red line at 5%, to show a marker in the sand for potential recession incoming.