Consumer's price index

The consumer price index or consumer price index (commonly called by its acronym CPI) is an economic index in the one in which the prices of a certain set of goods and services (known as "family basket" or "basic food basket) are valued, determined on the basis of the continuous survey of family budgets (also called "household expenditure survey"), that a number of consumers acquire on a regular basis, and the variation with respect to the price of each one, with respect to a previous sample. It measures changes in the price level of a basket of consumer goods and services purchased by households. This is a percentage that can be positive (indicating an increase in prices) or negative (reflecting a fall in prices).

It is an indicator widely used by governments to measure inflation.

Features

It is assumed that all IPC should be:

• Representative and reliable, taking the sample randomly and covering the largest possible population in a given area.
• Comparable, both temporarily and spatially, with other CPIs from other countries or periods in the same country.

Uses of CPI

The objective is to measure the evolution of the prices of goods and services representative of the consumption expenses of households in a region. The uses that are usually given are:

• Inflation indicator (as long as the CPI does not include the prices of intermediate consumption of companies or exported goods).
• Deflator of national accounts (or national accounting) and other statistics.
• Estimated cost of living (knowing that CPI It can't be a cost-of-living index for having great differences with it).
• It is also used to invoke wage review clauses.

In general we see that the loans requested in various financial institutions are reflected in UF or UTM, since the CPI will also readjust these indicators, so the effect of inflation on said debts will be more easily reflected.

Criticism of the CPI

The main criticisms that are usually mentioned regarding the CPI (and any price index) are generally the following:

• Replacement risk: price indices, using a fixed base basket defined in the base period does not take into account the substitutions of goods made by consumers in response to price changes. This criticism is based on the confusion of pretending that a CPI is a cost of living.
• It does not incorporate the introduction of new goods until an update is made in the product basket.
• It does not incorporate changes in quality. It's not true in all countries either.
• It does not incorporate a measurement of the price of the property.
• Results may vary if surveys are not properly conducted.
• It does not take into account the submerged economy.

These are the most common. However, they are not applicable to CPIs for all countries. Each country publishes on the occasion of the CPI base change a methodology detailing how they solve these and other problems. Most of the countries follow the international recommendations, among which those of the manual of the International Labor Organization stand out.

CPI by country

Europe (HICP)

The year 2002 is the base period of the new system in force in the European Union: this implies that all the indices that are subsequently calculated will refer to this year.

Countries that have joined the European Union have partly lost the flexibility to design their own indices and must do so in accordance with the rules of the European Central Bank. The index in accordance with these standards has been calculated in Spain since 1997 and is called the IPCA (IPC Harmonized).

Spain

The CPI calculation in Spain is prepared monthly by the National Institute of Statistics and published in the middle of the month following the one in which the calculation is made according to a data publication calendar prepared annually. The INE publishes both General CPI data and specific data for specific and regional goods or services. The specific CPIs are aggregated according to weighting criteria established by the INE in the General CPI.

Annual evolution of the growth rate of the General CPI in Spain, that is, evolution of inflation. The CPI is an index number (consumer price index) that ranges between 100 (base value and above or below 100 depending on whether prices go up or down). We can never refer to an index in percentage terms, that corresponds to the variation of the index. The CPI variation is a way of calculating inflation, which is the data shown below (annual variation in December of the reference year):

IPC General in Spain from 1995 to 2019

Reference:

United States

Mexico (INPC)

In Mexico, the INPC (national consumer price index) is published by INEGI.

Venezuela (INPC)