Written by Ali Pullaro
As a college student, a daily cup of coffee is a necessity. Heading home this past November for Thanksgiving break, the realization hit me that I would have to forgo my usual Starbucks coffee fix. As a Michigan student, I regularly rely on the three local Starbucks as my go-to source for the essential fuel that is coffee. It then crosses my mind how the State Street Chipotle will likely feel a bit emptier without my presence for the next week. Yet, my wallet might feel a bit more full as I indulge in home-cooked meals and the coffee supplied by my parents for a change. As a college student, the main commodities that I among most students focus on include food, fuel, and of course, tuition. However when it comes to the monthly Consumer Price Index (CPI) reports, these are the factors that are overlooked. Just before leaving for Thanksgiving break, on November 14th the U.S. Bureau Labor of Statistics (BLS) released its monthly CPI report. To my surprise, food and energy – the most significant commodities for college students – were excluded.
CPI can be applied in two forms relating to inflation: headline inflation and core inflation. Headline inflation is the total inflation in an economy that includes commodities such as food and energy. Core inflation is measured by both core CPI and core “personal consumption expenditures” (PCE) which represent the prices of goods and services purchased by consumers (Core Inflation Definition, n.d.). Core inflation excludes food and energy because these commodities are considered volatile or unpredictable because their prices move around faster (Headline Inflation – Definition, Formula, Applications, n.d.). This includes items such as my daily coffee runs, Chipotle bowls that I so consistently depend on, and the gas that allows me, as a college student, to travel back home for holidays. Even more importantly however, I consider college tuition to be a factor of the economy most important to me at this time in my life. And while education (tuition) is included in core inflation, it is important for me to observe it individually when looking at inflation because in the CPI, education is only considered by a small percent as part of the basket.
To further understand this concept, it is important to know how CPI is calculated and how it is used to determine inflation. The percentage change in CPI over a period of time is called the inflation rate. The “basket of goods and services” included in CPI are items that Americans regularly buy. The value of those items is assessed to the proportionality of how much they are sold (Curry, n.d.). The current cost of the basket in a given year is then compared to its cost in the prior year and then multiplied by 100 to determine the percentage. The monthly CPI follows the same process but corresponding to consecutive months instead of years.
Annual CPI = value of basket in current year value of basket in prior year x 100
The calculated CPI is then used to determine the inflation rate.
Inflation Rate = CPInew – CPIold CPIold x 100
There are several general limitations to CPI however. This is an index that measures the overall health of the economy. It represents mostly urban populations (in the U.S.) and leaves out rural areas (Curry, n.d.). Because the CPI creates overall statistics, it leaves out various demographics (such as college students) and what should be considered most important to them when considering inflation and what affects them the most. As a college student, while the most recent CPI report for the month of October 2023 was 3.1 percent, I realized it wasn’t necessarily putting the same importance on food and energy as students need. I found it important and interesting to individually go through the process to find the change in inflation for gas.
The inflation rate for the average gallon of gas between September and October of 2023:
CPISeptember = ValueSeptember ValueAugust x 100 = 3.804 3.76 x 100 1.01
CPIOctober = ValueOctober ValueSeptember x 100 = 3.40 3.804 x 100 .89
Inflation Rategas = .89-1.011.01 x 100 -11.88
This process is important because it could be applied to finding the increase in individual inflation rates, such as the inflation rate for college tuition between certain years by finding the CPI for 2022 and 2023 and the inflation rate between them.
Food, energy, and tuition are commodities that really affect college students and need to be looked at individually. CPI reports impact consumers in many different ways including what they have the power to purchase and how to reasonably spend money according to what is important to them at that time. So, maybe my basket of goods as a college student looks quite different from the BLS’ basket of goods included in the core inflation statements each month. The BLS has consolidated all expenditure items into eight major categories including food and beverage, housing, apparel, transportation, medical care, recreation, education, and other goods and services.
| Category | CPI Weight |
| Food & beverage | 15.4 |
| Housing | 42.1 |
| Apparel | 4 |
| Transportation | 16.9 |
| Medical | 6.1 |
| Recreation | 5.9 |
| Education | 5.9 |
| Other | 3.7 |
(Consumer Price Index, n.d.).
| UM Budget | 2023 | UM Weight | Annual % Change | CPI Contribution % |
| Tuition | 58072 | 66% | 2.9 | 1.9 |
| Room | 8676 | 10% | 5.2 | 0.5 |
| Board | 5784 | 7% | 3.3 | 0.2 |
| Transportation | 5000 | 6% | 9.2 | 0.5 |
| Recreation | 5200 | 6% | 5.7 | 0.3 |
| Other | 1560 | 2% | 6.7 | 0.1 |
| Apparel | 1000 | 1% | 2.6 | 0.02 |
| Medical | 2511 | 3% | -2 | -0.066 |
| TOTAL | 87803 | 100% | 3.6 |
(Consumer Price Index – October 2023, 2023).
The table above illustrates statistics related to eight categories that significantly impact me as a college student. These categories range from tuition and transportation expenses (including flights home) to clothing expenditures, often indulging in purchases at the ‘M Den,’ if I’m being completely honest.
Overall, CPI is a basket of goods and services targeted for the average person’s average consumption. However, a college student is not the average person. So while the BLS announced a 3.2% increase, a University of Michigan college student’s inflation increase could be 3.6%.
| Basket for Inflation | Annual Percentage Increase |
| Headline | 3.2 |
| Core | 4.03 |
| “Michigan Student CPI” | 3.6 |
(Consumer Price Index – October 2023, 2023).
References
Consumer Price Index. (n.d.). EconPort. Retrieved December 3, 2023, from https://www.econport.org/content/handbook/Inflation/Price-Index/CPI.html
Consumer Price Index – October 2023. (2023, November 14). Bureau of Labor Statistics. Retrieved December 3, 2023, from https://www.bls.gov/news.release/pdf/cpi.pdf
Core Inflation Definition. (n.d.). Investopedia. Retrieved December 2, 2023, from https://www.investopedia.com/terms/c/coreinflation.asp
Curry, B. (n.d.). What Is CPI? How Does It Track Inflation? – Forbes Advisor. Forbes. Retrieved December 2, 2023, from https://www.forbes.com/advisor/investing/cpi-consumer-price-index/Headline Inflation – Definition, Formula, Applications. (n.d.). Corporate Finance Institute. Retrieved December 2, 2023, from https://corporatefinanceinstitute.com/resources/economics/headline-inflation/