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Price index for goods and services. Consumer Price Index (CPI)

Concept of price index

Price index- this is an indicator in statistics that is used to calculate price dynamics in a certain time period.

Calculations are carried out in the following sequence:

1. Selection of objects for calculations using a representative sample ( various industries economics);

2. Selecting a system for weighing indicators;

3. Selecting a formula for calculating indices.

Types of price indices

Price indices are distinguished according to the basic objects for calculation. These include:

  • industrial price index;
  • agricultural price index;
  • transport tariff index;
  • index foreign trade;
  • capital investment index;
  • consumer index and indices - deflators.

Industrial price index shows the price level for goods and services that industrial enterprises (plants, factories, construction organizations, etc.) purchase for their production and technical purposes.

Agricultural Price Index shows the dynamics of food price fluctuations.

Transport Tariff Index includes prices for cargo transportation and transit payments (including transit of gas, oil and other resources).

Foreign trade price index shows the dynamics of prices for exported and imported goods. The price of goods that are produced for own consumption is not taken into account when calculating this index. For example, if one company produces the same product both for export and for the domestic market, then to calculate the foreign trade index, the price indicator of only that part of the product that was sold abroad is taken.

Deflator index- shows changes in one macroeconomic indicator (usually national accounts indicators) in the current period in relation to the base one.

Producer price indices indicate price dynamics in a certain sector of the economy. Unlike the industrial index, which tracks the dynamics of enterprise costs, the producer index tracks the dynamics of income from the sale of goods and services.

Each state creates a certain set of goods and services necessary to ensure a minimum standard of living. It is called consumer basket. An index that shows changes in the price of a consumer basket is called an index consumer prices.

Consumer price index is an index display of the price of a typical market basket of domestic and imported consumer goods and services that are purchased in the country’s domestic market. When calculating it, the cost of a basket of goods and services of a fixed composition in the current and base periods is compared.

All price indices are used to track changes in prices and tariffs on the market, study its conditions, to calculate the standard of living and the impact of price dynamics on it. Also, all indices are used in the analysis of the macroenvironment and serve as the basis for calculating various indicators of the system of national accounts. These include gross external product (GDP), gross domestic product (GDP), national income and others. All these indicators are used to select and adjust the state's macroeconomic policy. As an inflation index, mainly two price indices are used: the consumer price index (CPI) and the GDP price index, that is, the GDP deflator (Defl).

Methods for calculating the price index

The methods and methods for calculating the price index are the same for all types of indices.

When calculating price indices, the actual index and the average price index are obtained. The actual index shows the absolute deviation of the price level, and the average price index takes into account the share of each product in a representative sample, adjusting not only the price level, but also its structure.

All price indices can be divided into individual and group.

The individual index takes into account only the change in price for one type of product:

p1 - ​​prices of the reporting period;

p0 - prices of the base period;

The group price index takes into account the dynamics of the prices of all goods in the sample and is calculated as the sum of prices of the current period in relation to the sum of prices of the base period.

To calculate the price index in the economy, three methods are used:

  • Paasche index;
  • Laspeyres index;
  • Fisher index.

The Laspereys index shows how prices for products sold in the base period have changed. In other words, when calculating the index, we compare the cost of products that were sold in the previous period, but in the prices of the current period, in relation to the same number of goods, but in the prices of the previous period. Formula for calculating the Laspereys index:

p1 - ​​prices of the reporting period;

p0 - prices of the base period;

q0 is the number of goods sold in the base period.

The Paasche price index displays how prices for products sold in the reporting period have changed, compared to the prices of the base period, by the number of goods sold in the reporting period.

q1 - the number of goods sold in the base period.

It is worth noting that, in Russian Federation Since 1991, the Laspeyres index has been used to calculate price indices. The Paasche index does not take into account the fall in demand for certain goods during periods economic downturns and inflation, so its use becomes impractical.

The Paasche index somewhat underestimates the level of inflation, since it does not take into account assortment shifts in the current period relative to the base one. The Laspeyres index overestimates the inflation rate because it does not take into account the substitution effect expensive goods for similar cheap goods. To eliminate these disagreements, it is proposed to use the I. Fisher index, which is calculated as the geometric mean value of the Laspeyres and Paasche indices:

But calculating the Fisher index is very labor-intensive. Therefore, in economic practice this index is calculated very rarely.

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Economic Consumer Price Index is an index used to measure the average level of prices for services and goods for a certain period. It is based on the fixed cost of a certain number of services and goods that make up the consumer basket.

Consumer price index in the Russian Federation

In the Russian Federation, data on consumer price indices (abbreviated CPI), regional and federal, for the whole year and for the month are posted on the Rosstat portal. Similar statistical studies have been conducted since the early nineties.

The current formula for the consumer price index in a simple generalized version is as follows: the cost of the consumer basket is divided by the cost of the consumer basket in the base period. And then the figure obtained in this way is multiplied by 100%(and the final result is also, accordingly, displayed with percentages). For Rosstat’s calculations, the base period is taken to be the month or year preceding the current one. It is also worth mentioning that the calculations take into account the share of specific services and goods in the basket, for which the Laspeyres formula is used.

Let's bring specific example, to make it clearer what the consumer price index is. Rosstat indicates that in January 2017 compared to December 2016, the CPI was 100.5 percent, and in February 2017 compared to January 105 percent. That is, expenses increased by 5 percent. In addition, Rosstat calculates the consumer price growth index separately for goods and separately for services. These numbers, of course, may differ from each other.

It is also worth noting that in the economies of Western countries the consumer price index or inflation index is called the Consumer Price Index (abbreviated as CPI). Moreover, in each country, CPI is determined taking into account local specifics; everywhere there are some nuances. So, for example, in the United States, the consumer price index is calculated using a list of more than 260 items of services and goods selected in 85 cities of this country.

What does the consumer basket consist of?

The most controversial issue in the methodology for determining the CPI at the moment remains the question of the list of what should be included in the consumer basket. Now it proportionally includes expenses for:

  • food products;
  • shoes;
  • clothes;
  • electricity costs;
  • maintenance of your home;
  • medical care;
  • education;
  • public transport;
  • rest.

Of course, in order to accurately reflect fluctuations in the level of consumer spending, the basket itself must change over time and be in strict accordance with the actual structure of consumption. Let’s say that in 1993 it was inadequate to include spending on cellular communication, but today such inclusion seems absolutely necessary. In Russia, the consumer basket is taken for calculations, the parameters of which are approved by Federal Law No. 44, and, by the way, amendments to it were last made back in 2006.

“Minimum consumer basket for men of working age, prepared by the USSR State Committee for Labor in 1989.” and Federal Law No. 44-FZ of 2006 “On the consumer basket as a whole for the Russian Federation”

CPI and GDP deflator

In addition to the CPI, there is another statistical tool that performs similar functions - the GDP deflator. However, there are significant differences between these two indicators.

  1. The CPI includes only so-called final consumer goods, and for calculating the deflator, any final services and goods included in GDP are important.
  2. In the process of calculating the CPI, statistics take into account imports, while in determining the deflator, only those services or goods that are produced directly within the Russian Federation play a role.

The importance of the CPI for further strategic economic calculations

CPI data represents great benefit for many departments. Analyzing these data, it is easy to understand how much poorer or richer the inhabitants of the entire country (or any one subject of the federation) became over a certain time period. That is, consumer price indices for goods and services make it possible to adjust the income indicators of the country’s residents for the period to the general price level and determine more precisely whether the incomes of Russian citizens have increased or decreased in real terms.

Comparative table for calculating consumer baskets of pensioners

The Ministry of Economic Development uses CPI data when preparing indexations of wages of public sector workers, pension payments and various benefits. The consumer price index is also used to determine such a parameter as labor productivity.

There is also the so-called projected CPI (or projected inflation rate). Information about this level is taken into account when planning the budget.

In addition, the Central Bank of the Russian Federation uses the inflation forecast to calculate the average annual exchange rate of other currencies to the Russian ruble. If inflation is high, this indicates that the purchasing power of the ruble is falling. That is, the higher the CPI forecast, the weaker the national currency exchange rate today.

Consumer Price Index – we will define and calculate it!

Consumer Price Index (CPI)

— Consumer Price Index (CPI)
— Calculation of the Consumer Price Index
— The influence of consumer price indices on currency quotes
— General or consumer inflation
— The influence of the CPI index on Forex trading
— Weaknesses and strengths of the consumer price index
- Conclusion

CPI– consumer price index, reflects changes in the price level for a group of goods and services for reporting period(month, 3 months, year). Reflects changes in the cost of living in the country, being an early indicator of consumer inflation, recording changes in purchasing power national currency.

A rise in the consumer price index reflects the fact that a typical basket of goods and services has increased in price relative to the base period. The acceleration of CPI growth indicates an increase in the growth rate of consumer inflation, which, in the conditions economic growth is often a signal to tighten monetary policy.

The Consumer Price Index is usually published monthly and has a significant impact on exchange rates, as it allows a more accurate determination of the direction monetary policy state, as well as the state of consumer demand.

At the same time, the Central Bank often focuses not only on actual indicators of consumer inflation, but also on inflation expectations. If consumer price increases are expected to accelerate in the future, workers may begin to demand higher nominal income to improve your purchasing power. This in turn may force companies to increase selling prices, which will ultimately lead to higher consumer prices.

In addition, if companies expect higher rates of consumer inflation in the future, they will be inclined to increase their prices in the belief that consumer demand will not suffer.

Rising inflation rates make current consumption more attractive compared to saving.

On the one hand, the Central Bank’s monetary policy should prevent high rates of consumer inflation, as this is a sure sign of economic overheating.

On the other hand, too low indicators of the consumer price index can deprive households of the incentive to make purchases “now”, and companies to invest in production (Why invest in something that can only be sold later at a loss for yourself).

In light of this, deflation (a fall in prices relative to last year's level) poses a great danger to the economy, so Central banks are trying their best to avoid this by reducing interest rates or even starting the process of quantitative easing.

Often, when making decisions, the monetary committee does not rely on the general index, but on the so-called core consumer price index (Core CPI). When calculating this indicator usually do not include changes in food and energy prices, which are subject to sharp fluctuations due to changes in weather and seasonal factors, and due to the cyclical nature of economic development.

On the one hand, the core consumer inflation index is a more stable indicator, however, on the other hand, the excluded components account for about a quarter of the total volume and goods included in the CPI calculation, and have a noticeable impact on other groups of goods.

Calculation of the Consumer Price Index

This indicator is calculated on the basis of the consumer basket, which in a particular country includes various goods or services. The calculation process compares the value of this basket at the beginning of the period and at the end. As a result, you can get a picture of whether prices rose or fell over a given period.

Price increases are defined as inflation. As for its fall, it is called deflation (the reverse process of inflation).

Consumer price index, CPI (Consumer price index, CPI) is a price index that is calculated for a certain group of goods and services that determine the composition of the consumer basket of one resident of the country and is calculated for a certain period of time.

For example, in the United States, the consumer price index is calculated using 265 goods and services from 85 cities in the country. In Russia, when calculating, we take the consumer basket, the composition of which is approved Federal law No. 44-FZ “On the consumer basket as a whole for the Russian Federation.” It includes food, non-food products, and various services.

Thus, the consumer price index is the ratio of the entire consumer basket of the base year, which is valued at prices of the current year, to the consumer basket for the base year, which is valued at prices of the base year.

The Consumer Price Index is one of the most common price indices that plays an important role in the economy because is the base value that serves as an impetus for recalculation wages, social payments and other payments that must occur regularly and automatically, for example, every quarter, annually or every six months, by organizations that employ workers.

The important role of the consumer price index implies the need to create a unified methodology for calculating this indicator in the economy, which at one time would reflect the degree of change in the price level.

The calculation method itself also plays an important role.

When calculating indices, statistical accuracy entails the creation of a unified base and therefore the consumer price index in the country is based on single base, which represents the production volume of the base year or uniform shares of goods in the consumer basket. As a result, the CPI does not reflect the impact of price changes on changes in the share of consumption of any good.

In addition, the price index cannot estimate what percentage of the price increase is attributed to the qualitative improvement of the product itself.

So, the Consumer Price Index is an indicator that helps measure average cost goods and services for a certain period of time. The CPI is used to calculate the inflation rate. In fact, it can be called the “chief” in terms of inflation in a particular state.

The influence of consumer price indices on currency quotes

The influence of the CPI on the Forex market is difficult to overestimate. In fact, it is huge. This macroeconomic indicator can be considered the main one. At the time of publication, quite significant price fluctuations may begin in the market. In addition, the CPI is one of the main indicators for fundamental analysis, that is, for working with medium- and long-term trends.

If we consider the situation with other equal conditions, then there is an inverse relationship between the value of a currency and inflation. Rising prices lead to the depreciation of the currency and, conversely, falling prices lead to an increase in the value of the currency. Here, in general, everything is logical. As prices rise, to purchase certain goods and services, you will have to spend more money. If prices fall, less money is spent.

However, there is one more thing to consider for Forex traders important factor This is the intervention of central banks. When inflation is near its target levels, the central bank will not intervene unless expected sharp fluctuations CPI.

But if inflation deviates from targets or changes in a direction unfavorable for the country’s economy, the central bank will intervene in the situation. The main tools in in this case interest rates and the asset purchase program that is fashionable today are considered.

How can a central bank curb inflation? First of all, through rising interest rates. And here begins the first discrepancy with the basic theory of the inverse relationship between the value of a currency and inflation.

How will the market react to rising interest rates? Of course, the growth of the currency. It will be in demand, as the increase in rates means, among other things, more profitable investment for deposits.

In many situations, the market begins to win back the increase in rates in advance (with rising inflation) and thus the process becomes directly dependent rather than inversely.

General or consumer inflation

General or consumer inflation, or, in other words, the consumer price index (CPI), is the weighted average change in the price of goods and services, excluding electricity prices. These prices are excluded because they are seasonally dependent on consumption and prices.

Products included in the CPI calculation are weighted according to their economic importance. In total, this list includes more than two hundred categories of services and goods. All categories of these products are divided into 8 main groups:

Food and drinks.
Housing expenses.
Cloth.
Fare.
Medical support.
Rest, recovery.
Education.
Communications.

The influence of the CPI index on forex trading

Changes in the prices of consumer goods are perhaps the most accurate measure of inflationary trends in an economy. Moreover, an increasing trend in CPI indicates that the country's economy is experiencing inflation or a decrease in the purchasing power of the currency.

Since the function of the government reserve is to keep inflation in check, the central bank may decide to raise interest rates to control the currency. And, as a result, the value of the national currency is growing with a moderate increase in the fundamental CPI index. A currency may also weaken in a hyperinflationary environment, in which inflation skyrockets and gets out of control.

Reducing interest rates in a deflationary economic environment confirmed by the declining CPI. Therefore, a falling CPI price index will generally harm the currency exchange rate.

Weaknesses and strengths of the consumer price index

Like all indices and indicators that are used in the analysis of Forex market data, the fundamental consumer price index (CPI) has its strengths and weaknesses.

TO strengths this index can be attributed to:

- the ability to anticipate future fluctuations currency rates;
— CPI is subject to serious observation and analysis in media sources;
— serves as a reliable basis for analyzing regional data, as well as industry data.

Weaknesses of the CPI include:

— this index is volatile from month to month;
— a fixed CPI has certain limitations that can distort the results;
— excluding data on electricity prices is good only in the long term, but they still need to be taken into account when calculating inflation.

The Consumer Price Index (CPI) has a big impact on forex trading. As an important economic indicator, the CPI affects not only Forex, but also interest rates and commodity prices. stock market and the bond market. The consumer price index is also used to adjust cash flow mechanisms such as pensions, health insurance and income.

As a result, many traders and investors realize that the CPI influences their strategies in one way or another. The consumer price index compares the cost of a household's consumer basket with the same consumer basket for the previous period.

The Consumer Price Index is an important indicator of inflation in any economy. Traders should monitor the CPI. As soon as investors begin to feel inflation approaching, they are obliged to change their investment strategies and look for alternative ways to invest your capital. An investor receiving about 20% dividends on an investment may lose the investment when the currency inflation adjustment is 20% or more.

Governments also closely monitor the CPI. There are several measures that can be taken Central bank or the Federal Reserve to keep the consumer price index at acceptable levels. The CPI is also used to adjust payments to beneficiaries, military retirees and government employees. The CPI is also a guideline for adjusting the income tax structure to prevent tax increases that threaten inflation. All these actions have a direct impact on the foreign exchange market.

The CPI can also be affected by increases in the price of a particular currency. For example, rising oil prices can affect transportation, food, goods and services, and retail sales and, as a result, will stretch the budget of the middle class. In this case, a significant increase in the price of one product can trigger a domino effect, which will affect the strategies of investors and traders throughout the Forex market.

Conclusion

Traders who in their trading strategy rely on fundamental analysis, you need to know the Consumer Price Index. Since it is one of the most important indicators for the volatility of the Forex market.

Typically, CPI is published monthly and has a huge impact on exchange rates. The reason for this influence is that it allows one to determine the exact direction of government monetary policy, as well as the state of consumer demand.

The material was prepared by Dilyara specifically for the site

Properties

  • Based on a fixed price level for many goods and services in the consumer basket
  • The main tool for calculating inflation in the United States
  • Counts best indicator cost of living
  • Is a Laspeyres index, since the base year consumer basket is used in calculating the CPI

The consumer price index is calculated as the quotient of the product of the prices of the current year and the output of the base year by the sum of the product of the price level and the output of the base year. The entire fraction is then multiplied by 100%.

Problems of methodology

The most controversial point is usually the methodology for determining the composition of the consumer basket, both in terms of content and change. The basket includes, in a certain proportion, the average food consumed, clothing, electricity, living space maintenance and Vehicle, medical service, recreation and education. To adequately reflect changes in the level of consumer spending, the basket should focus on real structure consumption. Then it can change over time. For example, in 1992, mobile communications were not a consumer item and could not be included in the shopping cart. Ignoring the costs of mobile communications for the modern consumer it is simply absurd. At the same time, if you take only wired telephone communication, it will be comparable in essence, but not comparable in volume of use. Any change in the composition of the basket, either the introduction of new goods or a change in proportions, makes the previous data incomparable with the current ones. The consumer price index is distorted. If you compare the figures based on the new basket with the figures based on the unchanged basket, they may differ, sometimes by a very large amount.

On the other hand, if you do not change the basket, then after some time it will no longer correspond to the real structure of consumption. It will give comparable results, but these results will not correspond to changes in real consumption costs and will not reflect their real dynamics.

Notes

Links

  • Official consumer price indices and average prices of goods and services
  • Average consumer prices for individual goods in the Russian Federation in 1992-2008.
  • Summary methodology page according to the special data dissemination standard
  • Information on the Rosstat website according to a special data dissemination standard
  • Guide to the Consumer Price Index on the International Monetary Fund website in Russian

Wikimedia Foundation. 2010.

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Hi Hi! The other day I received some interesting questions that I would like to cover in today's blog. For example, how is the consumer price index (CPI) calculated, what does it show, does it really reflect the state of the market for goods and services in Russia and other countries, and how does it affect other areas - financial, industrial, social.

Macroeconomics is a rather specific science that is based on stereotypes (standards) - indicators, the calculation methodology of which has not changed for decades. One of them is the consumer price index, which is considered one of the most important indicators of the state of economic system countries.

Essentially, the CPI is the average temperature in a hospital, which does not always reflect the real situation in the economy. On the other hand, the consumer price index, the main indicator of inflation, has a huge impact on decision-making by both consumers and producers, investors and authorities. It allows you to get a general picture of the state of affairs in the country.

Let's look at the history of the consumer price indicator over the past 8 years. For comparison, let’s take the cost of the consumer basket of a resident of Russia and the consumer basket in the United States of America (USA).

December to December

Year Russia Consumer price index for goods and services USA Consumer Price Index CPI
2010 108,78 101,50
2011 106,10 103,00
2012 106,57 101,70
2013 106,47 101,50
2014 111,35 100,80
2015 112,91 100,70
2016 105,39 102,10
2017 102,51 102,10
2018* 102,352) 102,80

*August to December last year

Broadly speaking, the index is a weighted average of the cost of a basket of consumer goods and services, such as transportation, food and health care. The CPI is calculated by measuring prices for each component of a basket and averaging the prices.

Why is an index needed and where is it used?

The CPI is the most used measure of inflation and government performance. It gives an idea of ​​changes in the economy and serves as the basis for decision-making by both authorities, producers, and consumers.

When drawing up a business plan, the consumer price indicator is often used for forecasting cash flows enterprise, pricing and sales planning.

The Consumer Price Index can also be used to determine types and sizes state aid population, including social Security and subsidies. The CPI is one of the main macro indicators of economic growth of any country.

Types of price indices

Every month, Rosstat calculates and publishes the following main price indices and inflation indicators:

  1. RPI and tariffs for goods and services.
  2. Basic consumer price index (does not include short-term changes in the cost of goods under the influence of administrative or seasonal factors).
  3. Average consumer price indices for certain types of goods and services.
  4. Average consumer prices for separate species goods or services (average price levels for goods registered in trade organizations).
  5. Cost of the minimum food basket (set).
  6. Cost of living index (determines how much the basket of consumer goods and services in various regions and cities of Russia differs from its average cost in the country).

Rosstat also calculates the base value of a fixed set of consumer goods and services for comparison across regions.

Impact of the CPI on inflation

Inflation is a broader concept than the CPI, which includes, in addition to the increase in the cost of consumer goods, the rise in prices of food products, assets (real estate, borrowed capital, land), changes in the purchasing power of the national currency, etc.

Price regulation by the state affects only a small share of the consumer basket - basic essential goods.

The influence of the CPI on currency quotes

The CPI tends to have a significant impact on exchange rates because it determines the direction monetary policy states, as well as consumer sentiment.

For example, when the rate of inflation accelerates, people begin to spend more, while demanding an increase in salaries in order to be able to buy the usual range of products. This, in turn, provokes new round inflation - companies increase wholesale prices, which ultimately leads to an increase in household expenses.

For the national currency, this means a decrease in purchasing power, therefore, its reduction in price relative to other currencies. Therefore, traders and investors use the CPI indicator to analyze the foreign exchange market.

How is the index calculated?

The index shows the result of dividing the value of the consumer basket at current prices by the value of the basket in the base period. The result is expressed as a percentage.

Disadvantages of the index

As I have already said, economists have been arguing about the consumer price indicator for decades. The most significant point is the methodology for compiling the basket. It includes, in a given proportion, food and essentials, clothing, public utilities, transportation costs, fuel, medicines, spending on leisure and education.

To adequately assess changes in household spending, the basket must reflect the real structure of consumption. Consequently, its composition and the CPI need to be revised over time.

For example, in the 90s, mobile phone costs were not taken into account because they were not common. Now this article is present in 99% of households.

Changes in the basket in Russia from year to year (both the composition of goods and proportions) lead to incomparability of previous CPI data with the present ones.

On the other hand, if you do not revise the basket, after some time it will not correspond to the structure and real dynamics of consumption.

CPI and GDP deflator: what is the difference

The GDP deflator is another tool that is used to measure the inflation rate of a country. However, two indicators differ significantly:

  1. First, the deflator is calculated based on the value of total production in current year prices (essentially the Paasche index).
  2. Secondly, the CPI includes certain goods and services, the deflator includes everything that is included in GDP.

The disadvantage of the indicator is that it does not take into account imports. On the other hand, the indicator always reflects changes in prices for new goods and services, unlike the CPI.

Interesting facts about the consumer price index

To calculate the CPI, statistical authorities have to deal with significant amounts of data, which undoubtedly leads to errors. To reduce this risk, index determination is divided into several stages. Scientists first evaluate so-called elementary cost and expense indices. They are then averaged or, in other words, aggregated.

Features of the Russian consumer basket

According to the official calculation methodology, I present how much some components of the basket cost in the CPI.

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