The food consumer price index (CPI) tracks inflation of food items and is used by governments to make decisions about policies and program disbursements. It includes data on in-home and out-of-home food and is updated monthly. It is used to determine government intervention and appropriate allocation values for programs.
The consumer food price index (CPI) tracks the inflation of food items in a given country. Governments use monthly, annual and multi-year data from this index to make decisions about policies, government program disbursements and other related matters. Expresses price changes for specific food groups, plus combined food totals, in percentages. Along with energy, it is one of the most volatile CPIs. Food CPI is updated monthly.
A typical food CPI consists of data on both in-home and out-of-home food. The first covers food purchased from places such as supermarkets for home preparation. Food away from home measures inflation as it relates to restaurant meals.
The food consumer price index provides information on several groups of items in these two categories. Some common categories include meat, poultry, vegetables and fruits. Processed foods such as beverages, sweets and cereals are also included in the index.
Like the consumer price index, the food CPI is a compilation of information collected from thousands of companies. This data should reflect the buying habits of most people in the country. Typically, sales tax is included in the calculations.
Core CPI excludes potentially rapidly changing food and energy markets. This is mainly because the methods used by governments to calculate the price effect are quite slow. Changes in these markets will start to affect other industries before they are fully determined, so it’s less of a hassle to simply exclude these items.
Generally, the food CPI is reported along with other general and specific indices. A typical report will be presented as a standalone document and in relation to other key figures. For example, the complete consumer price index will note that certain drastic changes are the result of changes in the food consumer price index.
One of the main purposes of the food CPI is to determine whether government intervention is necessary to manage inflation. Keeping track of this particular index can be one of the key factors in preventing an economic depression. When prices are considered too high, the government often develops or changes policies to keep food expenditures at an appropriate level.
Another purpose of the food consumer price index is to determine appropriate allocation values for some government programs. For example, in the United States of America, it is used to calculate Social Security benefits. This is the main reason why disbursement levels change in these types of programs.
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