One hundred years of price change: the Consumer Price Index and the American inflation experience
For 100 years now, the Consumer Price Index has measured price change in the U.S. economy. Breaking the 100-year period into several distinct subperiods, this article examines major patterns and trends in price change during each one and highlights notable features of the CPI data. Also discussed are the reaction of the public and policymakers to the inflation of the day and the inflation experience of Americans in each subperiod.
The year 2013 marked, in a sense, the 100th anniversary of the Consumer Price Index (CPI), because 1913 is the first year for which official CPI data became available. For 100 years, the index has been a major measure of consumer inflation in the U.S. economy, through war and peace, booms and recessions. Over those 100 years, the general public and policymakers have focused almost constantly on inflation; they have feared it, bemoaned it, sought it, and even tried to whip it. Different subperiods saw different trends in price movement, so each generation of Americans had a different experience of price change from the ones before and after it. This article looks at major trends in price change from one subperiod to the next and at how Americans and their leaders regarded those trends and reacted to them.
- Food prices are the focus as the modern CPI is created.
- Sharp inflation marks the World War I era.
- Prices fall during the postwar recession.
- Prices remain relatively stable during most of the 1920s.
- All-Items CPI: total increase, 72.7 percent; 3.5 percent annually
1913–1929 by the numbers
Largest 12-month increase: June 1919–June 1920, 23.7 percent
Largest 12-month decrease: June 1920–June 1921, 15.8 percent
Annualized increase of major components, 1913–1929:
Food, 3.2 percent
Rent, 2.7 percent
Apparel, 3.2 percent
Fuel, electricity, and ice, 3.8 percent
Housefurnishings, 4.0 percent
Miscellaneous, 4.6 percent
Prices of selected items, 1913:
Potatoes, 2.5 cents/pound
Flour, 3.3 cents/pound
Rice, 8.7 cents/pound
White bread, 5.6 cents/pound
Round steak, 22.3 cents/pound
Butter, 38.3 cents/pound
It’s March 15, 1913, and according to The New York Times, the National Housewives League is concerned. Meat prices are up, and the group wants something done about it. In huge print, a headline proclaims their solution: “Raise meat animals, housewives advise. Tell the home farmers that is up to them to check soaring prices.”1
A few months later, the same newspaper reported on a bulletin issued by the Bureau of Labor Statistics (BLS, the Bureau). The bulletin’s data showed the reason for the League’s concern: although the price of several staples had fallen from January to February, meat prices were up. Moreover, most meat prices were considerably higher in 1913 than they were throughout the 1890s. Smoked bacon had increased 111.6 percent, for example. Round steak had risen 84.5 percent.2
Whatever the home farmers may or may not have done, however, the coming years would produce more price increases. When the CPI was finally created in 1921 and a time series back to 1913 was established, it would show food prices more than doubling from 1913 to 1920. Only a sharp recession in 1921 would produce a decline.
So, even before the existence of the CPI, inflation was on the minds of the public and in the headlines of the news. Indeed, in some ways, little seems to have changed over the past 100 years. Price increases, particularly in frequently purchased goods, vex the public and greatly color its perception of the economy. Of course, BLS price data were controversial even before the existence of the CPI: a March 2, 1914, story published in The New York Times details criticism of BLS bulletins as providing misleading data about the cost of living. J. W. Sullivan, an author and activist, wrote to Secretary of Labor William B. Wilson, asserting that the bulletins were “inadequate as a basis for percentages representing the general cost of living.”3 Indeed, general dissatisfaction with the state of price statistics helped lead to the creation of what became the official CPI. As prices increased during and following World War I, a consensus was reached that the existing data, consisting predominantly of food price measures, was inadequate as a basis for measuring the cost of living or the general price level. More comprehensive price collection in 92 cities began in 1917, and in 1919 the Bureau began publishing semiannual cost-of-living data for 32 cities. Estimates back to 1913 for the country as a whole also were created, although some wholesale price data were used to augment the retail price data. Regular publication of the official U.S. CPI began in February 1921.4 A survey of White wage-earner families in 92 cities formed the basis of the market basket used to calculate the early CPI. The major groups of that CPI (then called the Cost of Living Index) were food, clothing, housing, fuel and light, housefurnishings, and miscellaneous.5 A more detailed look at what was actually being priced provides a glimpse into the nation’s life at the time. Food staples dominated. Beef was of particular importance; indeed, one BLS bulletin from 1923 shows several diagrams of cows, illustrating the way beef was cut in different cities. The men’s clothing index of 1919 prominently included straw hats. Durable goods were few; there were no cars or radios priced in the early CPI.
1 “Raise meat animals, housewives advise,” The New York Times, March 15, 1913.
2 “Four food staples decline in price,” The New York Times, June 22, 1913.
3 “Wilson’s figures wrong, he’s told,” The New York Times, March 2, 1914.
4 The Consumer Price Index: history and techniques, Bulletin No. 1517 (U.S. Bureau of Labor Statistics, 1966), p. 2.
5 Lawrence H. Officer, “What was the Consumer Price Index then? A data study,” see especially p. 21, http://www.measuringworth.com/docs/cpistudyrev.pdf.