U.S. GDP Deflator vs. CPI: How Inflation Measures Differ and Why It Matters
The Consumer Price Index (CPI) and the GDP deflator are both measures of inflation, but they track different baskets and scopes. The CPI measures prices paid by urban consumers for a fixed basket including imports, while the GDP deflator measures prices of all domestic production with a changing basket. Since the early 1970s, the CPI has risen almost 30% more than the GDP deflator, a gap that matters for cost-of-living adjustments and real GDP.
