Noted previously, Greenspan has said for a long time that the CPI was not truly reflecting the buying practices of the consumers. That's due to the fact that there are CPI adjustments for 47.8 million Social Security recipients, 4.1 military and civil service retirees, 2.4 million food stamp recipients and 26.7 million children who receive school lunches. CPI is an indicator of inflation on the retail level. It is based on the expenditures reported by almost all urban residents, including professional employees, the self-employed, the poor, the unemployed, and retired persons as well as urban wage earners and clerical workers. CPI is seasonally adjusted to cull apart the changes that are seasonal from the underlying economic changes.
Seasonal changes are fluctuations in prices that occur at the same time very year.
For example, gasoline costs more in the summer, tomatoes cost more in the winter. The unadjusted data is what people actually pay. The adjusted data is what is reported in the media. CPI is a number that reflects prices with 1982-1984 averages as 100.0. The one criticism that can be made is that it takes no account for what people actually buy.