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What is the Cost of Living Index?

Discover how the cost of living index is calculated and what it tells you about your finances.

The cost of living index can help you calculate your monthly expeditures in different U.S cities. [©Jupiter Images, 2009]
©Jupiter Images, 2009
The cost of living index can help you calculate your monthly expeditures in different U.S cities.

The cost of living frequently makes headlines, especially when it goes up. Cost of living is measured by the cost of living index, which gauges and reports changes in prices for everyday items and services among metropolitan areas.

The ACCRA Cost of Living Index, sometimes referred to as the COLI, is a copyrighted report published quarterly by the Council for Community and Economic Research (C2ER). It is not a U.S. government publication.

What the Cost of Living Index Measures

The cost of living index is designed to be a reasonable measure of the differences in prices of consumer goods and services among participating U.S. metropolitan areas. Goods and services included in the index are divided into six major categories:

• Grocery items
• Housing
• Utilities
• Transportation
• Health care
• Miscellaneous goods and services

For example, the cost of living index determines how many grocery items one could buy with $100 in Chicago as compared to other U.S. cities. The cost of living index measures price levels among cities and does not compare data among states. According to C2ER, "weights assigned to relative costs are based on government survey data on expenditure patterns for mid-management households."

The metropolitan areas included in the cost of living index are ones whose chambers of commerce or economic development organizations have volunteered to participate. Volunteers from those organizations collect price information at a specified time and in compliance with C2ER guidelines. C2ER then reviews all of the reported prices for errors.

Consumer Price Index

The cost of living index sometimes is confused with the Consumer Price Index which is compiled by the U.S. Department of Labor Bureau of Labor Statistics. While the cost of living index compares the prices of goods and services among different metropolitan areas, the Consumer Price Index measures changes in the price of a representative basket of goods and services in metropolitan areas over a period of time. The Consumer Price Index is commonly used as a measure of inflation, and data is published monthly.

How to Order a Report

For more information on the cost of living index or to order the ACCRA Cost of Living Index report, visit the C2ER web site. The report is available in paper or electronic format, and can be purchased as a single report or as part of a yearly subscription. The C2ER Web site includes a review of the cost of living index methodology, geographies and tips for interpreting data.

To learn more about the Consumer Price Index, visit the U.S. Department of Labor Bureau of Labor Statistics Consumer Price Index web site. A variety of detailed Consumer Price Index reports and publications are available online.

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