Purdue Consumer Science professor offers insight into the consumer price index and common misconceptions

Written By: Rebecca Hoffa, rhoffa@purdue.edu

When Larissa Adamiec, clinical associate professor in the Purdue University White Lodging-J.W. Marriott, Jr. School of Hospitality and Tourism Management’s Division of Consumer Science, was about 6 or 7 years old, she started playing credit card company with her siblings, so becoming an expert in financial counseling and planning seemed inevitable. Joining the College of Health and Human Sciences in fall 2025, Adamiec brings a wealth of experience in financial markets, investments and more.  

As consumers prepare their budgets for the new year and topics about the consumer price index, inflation, tariffs and interest rates continue to circle the news, Adamiec shares her knowledge and advice for individuals to make smart budgeting choices.

Larissa Adamiec(Photo provided)

What is the consumer price index (CPI)?

The CPI was designed to measure how much prices were changing. Years ago, the federal government put together a variety of common goods that are going to be in this basket, and it measured prices from year to year to see the change in fluctuations. That basket has changed over years. Fifty years ago, for example, a cell phone wouldn’t be in that basket, but today, quite a bit, it’s a necessity. As a result, because there are changes in the basket, you’re going to see some changes in the calculation. So, if a new good is added, we don’t have historical context for that.

What are some common misconceptions about CPI?

When we think about prices relative to the CPI, you’re going to hear economists saying prices have stabilized and that we no longer see that inflation. However, if you’re speaking to somebody who’s talking about their day-to-day lives, they’re going to tell you that no, inflation is very real.

When we think about economists, they’re thinking about prices from period to period. So if, let’s say, eggs go from $3 to $4, we’re going to see quite a huge jump in inflation. Now, once they’re at $4, if they go to $4.05, there’s not much inflation there. However, because of that initial huge jump, people still feel like there’s inflation, even though inflation has stabilized. One of the challenges is when you think about inflation, you’re going to also have to not only think about the change in the prices, but you have to think about the time period you’re looking at. Economists typically look at quarter to quarter as opposed to year to year, or what a lot of end users will feel in a five-year trajectory.

And even though everybody’s incomes are sticky and not growing with the change in prices, for those who have a lot of resources, most likely a food budget is a small portion of their overall household income. If you’re only spending 5% of your household income on groceries, you are not going to notice a change in the price of eggs versus if you have another group and if groceries are 20% of their budget — all of a sudden that matters a lot more. So not only are we looking at changes in how CPI is calculated, we’re looking at different time frames, the fact that incomes haven’t really changed with it and how it impacts different groups of people within our economy.

How did economic influences affect holiday shopping during the 2025 season?

The tariffs had an interesting impact. We had suppliers stocking up on goods, so we actually had pretty good deals because they’re getting rid of their surplus inventory. It’s also interesting: I think a lot of consumers bought Christmas presents in the summer and in September and October. Because of that, there’s not as much of a demand for some of those goods. I’ll be curious of what the sales in January and February are going to look like and how much they actually were able to move their merchandise over the holiday period.

What economic trends do you see carrying forward into 2026?

Preparing yourself to get into this, you are going to really want to think long term about what big bills you’re going to want to tackle and see which bills that you could maybe reduce. So, if you do have the opportunity to downsize your home, it might be an opportunity. However, most people who have children and who are not single, that might not be a realistic option for them. Even if you were to think about downsizing your car, that also might not be a realistic option. So, it’s planning on, if you know that you’re going to have larger bills, let’s say a child going to college, you might want to start thinking about how to leverage the lower rates to start saving for that child.

But it’s difficult. If you’ve got a high mortgage and a high car payment, you’re going to pay those. And it’s difficult to say, “Well, I can cut back on going out to eat,” but then there’s a limit for how much you can cut back.

What is your best advice for how to view the consumer price index?

Take it with a grain of salt and understand that it is an aggregate number that doesn’t necessarily reflect your personal situation. But also note that economists use it, so if you feel that the economist is making a decision that doesn’t seem to really help your situation, it’s because of this aggregate number.