Consumer Price Index Inflation

Inflation, which is the change in the level of prices over time, affects City finances in many ways.  For example, in its financial planning and budgeting, the City must take inflation into account in calculating its costs for goods and services, labor, and employee benefits. Seattle City revenues are also affected by inflation, as the prices of taxable goods and services rise over time, in addition, formulas used to calculate the tax liability for some taxes directly involve measures of inflation.

The economic modeling and forecasting that the Office for Economic and Revenue Forecasts conducts each quarter includes a forecast of regional inflation for Seattle MSA metropolitan area. These inflation estimates inform both near- and longer-term financial planning for a variety of City departments, including the City Budget Office. Inflation forecasts are developed and reported for both traditional calendar-year measures of inflation, and for measures that capture price increases over the period from June of the previous year to June of the current. These latter measures have traditionally been incorporated into contracts between the City and its unionized labor force, and they are therefore important for the City's internal financial planning.  

The Frequently Asked Questions section explains how inflation is measured by the Consumer Price Index (CPI) and how to adjust financial data to remove the effects of inflation. Cost of Living Adjustment Calculations provides information on how the City uses the CPI to calculate cost-of-living adjustments for labor contracts. In addition, the site contains historical data and forecasts of the CPI for both the U.S. and the Seattle MSA metropolitan area.