Inflation is an economic phenomenon that touches our lives on daily basis. In fact it is imperative to understand the concept of inflation to plan and manage budget be that of a small household. Inflation is generally defined as the rate at which prices increase in an economy over a period of time. A 'price index' is a measured indicator of the changes in the prices of a 'basket' of goods and services over a given base year.
The Federal Bureau of Statistics (FBS) of the Government of Pakistan computes inflation using three different indices namely:
i. Consumer Price Index (CPI) also called 'headline inflation' is the main measure of price changes at the retail level. It is used to measure changes in the cost of buying a representative fixed basket of goods and services and indicates the general 'rate of inflation' in the country. CPI was computed for the first time in the cities of Karachi, Lahore and Sialkot. CPI is the most widely used measure of inflation in the world;
ii. Sensitive Price Indicator (SPI) is constructed on weekly basis to assess the price movements of essential commodities at short intervals;
iii. Wholesale Price Index (WPI) depicts directional movements of prices for a set of selected items in the primary and wholesale markets. Items covered in the basket of WPI are those which could be precisely defined and are offered in lots by producers / manufacturers.
Prices Indices in Pakistan
(with Common Base Year 2001-01)
Features
CPI
SPI
WPI
Number of cities covered
35
17
18
Number of markets covered
71
53
18
Number of items covered
374
53
425
Number of commodities covered
92
-
106
Number of commodity groups
10
-
5
Number of price quotations
106,216
11,236
1,550
Reporting frequency
Monthly
Weekly
Monthly
Number of income groups
Four
Four
-
Some of the products in the CPI basket have temporary price shocks. Since these shocks can diverge from the overall trend of inflation and give a false measure of inflation, so a subset of CPI called 'core inflation' is used, as an alternate, to reflect the extent of underlying long-term inflation.
Core inflation is calculated by excluding products with volatile and controlled prices from the CPI basket. There are two methods employed by the Pakistan's FBS to calculate core inflation i.e., Trimmed-Mean Inflation (TMI) and Non-Food & Non-Energy (NFNE) inflation.
TMI is computed by three steps:
i. First all the CPI items are arranged in ascending order according to Year-over-Year (YoY) changes in their prices in a given month;
ii. 20% of the items showing extreme changes are excluded i.e., 10% of the items at the top of the list and 10 % at the bottom of the list;
iii. The weighted mean of the price changes of the rest of the items is core inflation.
NFNE inflation is calculated by excluding food group and energy items (kerosene oil, petrol, diesel, CNG, electricity and natural gas) from the CPI basket.
Here is a chart depicting historical CPI-SPI-WPI trends in Pakistan:
Consumer Price Index (CPI)
Consumer price index is a way to measure the averages of prices of consumer goods and services. It is calculated by taking price changes of items or goods and averaging them. Consumer price index is used to assess price changes associated with the cost of living.
Consumer Price Index - United Kingdom - was created in 1947.
The Consumer price index is calculated based on a random sampling done by the US labor department
When the consumer price index rises the typical family has to spend more money. The price index will directly affect the cost of living for a family.
The consumer price index (CPI) provides a method for calculating the price changes that consumers and household managers face over a stated period.
Perhaps you mean CONSUMER price index, which is a tool to measure changes in the price level of consumer goods and services purchased by households in a given country.
consumer price index
food and energy
consumer price index
Consumer Price Index
consumer price index