The Consumer Price Index (CPI) is calculated using a complex methodology that involves collecting and analyzing data on the prices of a basket of goods and services purchased by households. The process involves several key steps:

1. Selection of the CPI Basket: Economists and statisticians select a representative basket of goods and services that reflects the typical spending patterns of urban consumers. This basket typically includes items such as food, housing, transportation, healthcare, and education.

2. Price Data Collection: Prices for the items in the CPI basket are collected regularly from thousands of retail outlets, service providers, and other sources across the country. These prices are typically gathered monthly, although some items may be priced more frequently.

3. Weighting: Each item in the CPI basket is assigned a weight that reflects its importance in the average consumer's spending. Items that consumers spend more on, such as housing and transportation, are given higher weights than less significant items.

4. Calculation: The CPI is calculated using a weighted average of the price changes for all items in the basket. This involves multiplying the price of each item by its weight, summing these values, and then dividing by the total weight of the basket.

5. Base Year Comparison: The resulting index value is then compared to a base year, which is typically set to 100. Changes in the CPI over time are measured relative to this base year, with increases indicating inflation and decreases indicating deflation.

The CPI provides a valuable measure of inflation that helps policymakers, economists, businesses, and consumers understand changes in the cost of living over time.