 News Consumer price index 24/03/2010 01:34 pm

Consumer price index (CPI or abbreviated from the English word Consumer Price Index) index is calculated as a percentage to reflect the changing relative prices of consumer goods over time. Fan sites are changed relative because this index is based on a basket of goods representing the entire consumer goods.

This is an indicator most commonly used to measure price changes and prices is inflation (the other indicators to reflect the general price level index deflation of domestic product or index adjusted GDP).

Method for calculating the consumer price index

To calculate the consumer price index is calculated the average power of the Laspeyres formula, the price of the reporting period (period t) over period basis. To do that must proceed as follows:

1. 1. Fixed basket of goods: through investigation, we will determine the amount of goods and services that a typical consumers typically purchase.

2. 2. Determined price: statistics price of each item in the basket of goods at each time.

3. 3. Costs (in cash) to buy a basket of goods using the number of times the price of each type of goods and then combined.

4. 4. Option period to the original basis and then compare the consumer price index calculated by the following formula:

 CPI t = 100 x CPI t = 100 x Cost to purchase goods shopping period Cost to purchase any goods shopping facilities

Base period will be changed within 5 to 7 years depending in each country.

If you would like to count only the inflation of the period, we applied the following formula:

Inflation index period T = (CPI period T - T-1 period CPI): CPI period T-1

In fact one can determine the right number in calculating the consumer price index by the investigation to calculate the proportion of expenditure of each group of goods and services compared to the total value of expenditure. Then right number is used to calculate the consumer price index for the period. CPI is usually calculated monthly and annually. CPI is also calculated for each group of goods or some groups of goods according to purposes. In addition we also calculate the CPI price index of wholesale prices of a basket of goods purchased by businesses in, other than the CPI is the consumer to buy (retail price).

Problems encountered when calculating the consumer price index

By use of a fixed basket of goods when calculating CPI should have three main issues to limit the CPI following

1. 1. CPI does not reflect the deviation replaced because it uses a fixed basket of goods. When an item price is increased faster than other goods, then consumers will tend to be less consumption of the item has become so expensive that many of these consumer goods more expensive support. This factor was rated as CPI than the actual price.

2. 2. CPI does not reflect the appearance of new goods because it uses a fixed basket of goods in the goods if they appear a currency can buy a wider variety of products. CPI did not reflect the increased purchasing power of the currency should therefore assess Now price higher than the reality.

3. 3. Not reflect changes in quality of goods because if the price of the goods certain specific increases but also increases the quality of the corresponding increase even more the actual price level does not increase. Quality goods and services were generally tend to be improved CPI should also exaggerated price.

Calculate the consumer price index in Vietnam

Calculating the CPI in South Vietnam by the General Statistics Office undertook. Right to calculate the CPI determined in 2000 and began to apply from July of 2001. Right number is based on the results of two surveys are census population living south Vietnam Economic Survey 1997-1998 and households in 1999. Article notably the right of the Categories of Food - Food accounted for 47.9%, while Culture - Sports - Entertainment makes up only 3.8%.