What is the CPI or Consumer Price Index?
or Consumer Price Index is an indicator used to gauge movements in prices of goods and services consumed by households. Like inflation, the CPI shows the rising cost of living within a certain economy.
The Consumer Price Index is drawn up on the basis of the prices of a typical shopping basket for an average household. In Spain the CPI is calculated by the INE National Statistics Institute, on the basis of a shopping basket with 955 items in various categories such as food, beverages, clothing and footwear, housing, household items, medicines, transport, communications, leisure and culture, hotels, cafés and restaurants, teaching and other goods and services. The composition of the index is revised on a regular basis to add new items the consumption of which is rising, or to remove others no longer being consumed.
The items representing consumption by families in the CPI shopping basket are chosen on the basis of the extent to which they account for expenditure on each group of products. For example, the group of food and non-alcoholic beverages now accounts for 22.6% of the total shopping basket.
What are the different types of CPI indexes?
The CPI indicator is released monthly and is presented in comparison to the preceding month (monthly percentage change) and to the same month the preceding year (annual change). In addition to the general indicator, which is released at the end of every month as a preview version, and halfway through the following month as a complete harmonised version, there are other types of CPI which provide more information on rising prices in the country.
The underlying CPI is calculated with no account taken of energy prices and
the prices of non-transformed foodstuffs. This index is produced by subtracting the prices of non-transformed foodstuffs (such as fruit, vegetables, meat etc.) and energy products from the general CPI.
The harmonised CPI is used in the European Union to compare developments in the inflation of member states. It is based on a basket of products common to the 27 countries. This indicator compares developments in prices in the member states and is used when a new country is added to the eurozone.
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