The food consumer price index (CPI) tracks inflation for food items in a particular country. Governments use monthly, annual, and multi-year data from this index to make decisions about policy, disbursements from government programs, and other related issues. It expresses price changes for specific groups of foods, in addition to combined food totals, in percentages. Along with energy, it is one of the most volatile CPIs. The food CPI is updated monthly.
A typical food CPI consists of data about food-at-home and food-away-from-home. The former covers food that is purchased from places such as grocery stores for domestic preparation. Food-away-from-home measures inflation as it relates to restaurant meals.
The food consumer price index provides information about several groups of items within these two categories. Some common categories include meat, poultry, vegetables, and fruit. Processed foods such as beverages, sweets, and cereal are also included in the index.
As with the full consumer price index, the food CPI is a compilation of information collected from thousands of businesses. This data is meant to reflect the buying habits of most people in the country. Typically sales tax is included in the calculations.
The core CPI excludes the potentially fast-changing food and energy markets. This is primarily because the methods used by governments to calculate the effect of prices are fairly slow. The changes in these markets will begin to affect other sectors before they are completely determined, and thus it is less complicated to simply exclude these items.
Usually, the food CPI is reported alongside other general and specific indexes. A typical report will be presented as a stand-alone document, and in relation to other indexes. For example, the full consumer price index will note that certain dramatic changes are the result of shifts in the food consumer price index.
One major purpose of the food CPI is to determine if government intervention is necessary in order to manage inflation. Keeping track of this particular index can be one of the key factors in preventing an economic depression. When prices are deemed to be too high, the government will often develop or change policies in order to keep food expenses at an appropriate level.
Another purpose of the food consumer price index is to determine the appropriate distribution amounts for some government programs. For example, in the United States of America, it is used to calculate benefits for Social Security. This is the primary reason that disbursement levels change in these kinds of programs.