Cost-Of-Living Index

A cost-of-living index measures the changes in prices consumers pay for a fixed basket of goods and services over time.

While the Bureau of Labor Statistics states that its monthly Consumer Price Index is not a complete cost-of-living measure, the CPI is usually considered a cost-of-living index; indeed, CPI and cost-of-living index are often used interchangeably. A general cost-of-living index like the CPI measures price changes for tens of thousands of items in housing, medical care, education, recreation, and other categories.

Selecting items for a cost-of-living index poses major challenges, however, because new technologies and changing lifestyles greatly affect the consumer’s shopping basket. Note that a cost-of-living index is computed for specific geographic areas; thus companies will use a cost-of-living index to compensate employees who live in high-cost regions. A cost-of-living index is also frequently used to determine wage hikes. For investors, successive increases in the cost-of-living index point to increasing inflationary pressures that will eventually cause the Federal Reserve to tighten monetary policy.

Examples of Cost-Of-Living Index in a sentence

You should always try and keep a close eye on the cost-of-living index so that you know how to market your product.

In the past 6 months, the cost-of-living index has actually risen 2 percent and has no downward trend for consumers.

Fred was worried because the inflation rate was going up and his pension wasn’t being adjusted based on the cost-of-living index.

Synonyms For Cost-Of-Living Index

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