Consumer Price Index

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When a CPI Index graph says that the index is "unadjusted," what does this mean?

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An unadjusted CPI is a CPI that has not been modified to take into account predictable seasonal changes in prices.

The CPI is the Consumer Price Index.  It is a measure of the average price of goods in a country at a given time.  The CPI uses the prices of a set “market basket” of goods and compares them to a standard.  This allows us to understand how much prices have changed over a given amount of time.

The CPI should, therefore, be an accurate way to compare price levels over time.  The problem is that there are typically variations in prices that occur in predictable ways over the course of a year.  For example, if we were to measure the price of a television in late November, it might well be lower than the price in March because stores typically reduce prices during the Christmas sale period.  This would make the CPI in November (assuming the TV was part of the market basket) lower than the March CPI in an artificial way. 

Because these sorts of seasonal variations occur, economists sometimes adjust the CPI to account for them.  Thus, an adjusted CPI is one in which the seasonal variations have been accounted for.  An unadjusted CPI is one in which they have not been accounted for.

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