The consumer price index for goods and services (CPI) is one of the main indicators that characterize inflationary processes in the country. The CPI is used when recalculating macroeconomic indicators from current prices to comparable prices. This indicator is also used to characterize changes in consumer spending on goods and paid services in the current period compared to the previous (base) period under the influence of changes in prices for these goods and services in individual constituent entities of the Russian Federation and in the country as a whole. Based on the CPI, the value is calculated, in particular, per capita and for the main socio-demographic groups. Using CPI indicators, employers can make mandatory (Letter of Rostrud dated April 19, 2010 No. 1073-6-1, Constitutional Court Determination dated November 19, 2015 No. 2618-O).
Consumer Price Index: Formula
The CPI characterizes the change over time in the general level of prices for goods and services purchased by the population and is calculated as follows:
CPI = C 1 / C 0,C 1 - the cost of a fixed list of goods and services in prices of the current period;
C 0 - the cost of a fixed list of goods and services in prices of the previous (base) period.
The set of goods and services on the basis of which the CPI is calculated is the same for all constituent entities of the Russian Federation and represents a selection of groups of goods and services most frequently consumed by the population developed by Rosstat. This set consists of food products, non-food products and services.
How often is the CPI determined?
The CPI is calculated monthly within the framework of the Federal Statistical Work Plan, approved by Government Order No. 671-r dated May 6, 2008. The methodology for calculating the CPI is established by Rosstat Order No. 734 dated December 30, 2014.
Information about approved CPIs is posted on the Internet on the official website of Rosstat
Inflation measurement,
concept of consumer basket.
Consumer price index.
1 The concept of “Inflation”, types (classification), causes, assessment of the phenomenon of “inflation”
It is worth noting that inflation should be distinguished from a price jump, since this is a long-term, sustainable process. Inflation does not mean an increase in all prices in the economy, because the prices of individual goods and services may rise, fall, or remain unchanged. It is important to change general level prices
Talking about classifications inflation, it is necessary to highlight its other kinds:
In addition to the already mentioned open and suppressed inflation,
exists:
· Demand inflation - is generated by an excess of aggregate demand compared to the real volume of production (shortage of goods).
· Supply (cost) inflation - price increases are caused by an increase in production costs in conditions of underutilized production resources. Increasing unit costs reduces the volume of products offered by manufacturers at the existing price level.
· Balanced inflation - the prices of various goods remain unchanged relative to each other.
· Unbalanced inflation - prices of various goods change in relation to each other in different proportions.
· Projected inflation is inflation that is taken into account in the expectations and behavior of economic entities.
· Unpredicted inflation - comes as a surprise to the population, since the actual rate of growth in the price level exceeds the expected one.
· Adapted consumer expectations - changing consumer psychology. Often arises from the dissemination of information about future potential inflation. Increased demand for goods allows entrepreneurs to raise prices for these goods.
Depending on the growth rate, there are:
· creeping(moderate) inflation
(price growth less than 10% per year).
The growth of the money supply accelerates payment turnover, reduces the cost of loans, and contributes to the activation of investment activity and the growth of production. The growth of production, in turn, leads to the restoration of equilibrium between the commodity and money supply with more high level prices Average inflation rate for EU countries for last years amounted to 3-3.5%. At the same time, there is always a danger that creeping inflation will escape state control. It is especially great in countries where there are no established regulatory mechanisms economic activity, and the level of production is low and is characterized by the presence of structural imbalances;
(annual price increase from 10 to 50%).
It is dangerous for the economy and requires urgent anti-inflationary measures. Predominant in developing countries;
(prices are growing very quickly, according to different sources from tens to several thousand and even tens of thousands of percent per year). It arises due to the fact that the government issues an excess amount of banknotes to cover the budget deficit. It paralyzes the economic mechanism and causes a transition to barter exchange. Usually occurs during periods of war or crisis.
The expression chronic inflation is also used for long-term inflation. Stagflation is a situation where inflation is accompanied by a drop in production (stagnation).
Causes of inflation
There are different views on the essence and causes of inflation, but two directions predominate: the first views inflation as a purely monetary phenomenon caused by a violation of the laws of monetary circulation; the second - as a macroeconomic phenomenon caused by a violation of the proportions of social reproduction, and primarily between production and consumption, demand and supply of economic goods.
Meanwhile, inflation is a complex, multifaceted phenomenon, the causes of which are determined by the interaction of factors in the sphere of production and the sphere of monetary circulation.
Inflation outwardly looks like a depreciation of money due to its excessive issue, accompanied by rising prices for economic goods.
But this is only a form of manifestation, and not the deep essence and cause of inflation. Typically, inflation has its external manifestation in rising prices. But not every price increase is an indicator of inflation. Prices may increase as a result of improving product quality, deteriorating conditions for the extraction of raw materials, and change under the influence of cyclical and seasonal fluctuations in production, natural Disasters etc. But these will not be inflationary, but to a certain extent natural periodic changes in prices for individual goods.
In reality inflation is the result of a macroeconomic imbalance, which is caused by a complex of internal and external reasons
The most important internal causes of inflation are:
· violation of the proportions of reproduction: between production and consumption, accumulation and consumption, supply and demand, the money supply in circulation and the sum of commodity prices;
· a significant increase in the state budget deficit and public debt due to unproductive government spending;
· excessive emission of money, violating the laws of monetary circulation;
· militarization of the economy, which diverts a significant part of resources into the defense industry, is heavy burden for the state budget, increases its deficit and generates its (deficit) inflationary financing;
· increase in the tax burden on producers;
Assessing the phenomenon of “inflation”
Inflation is usually considered a purely negative phenomenon. However, it can also have a positive effect.
If the state has a large debt, then inflation can play into its hands, because debts will have to be distributed in an already devalued currency.
Thanks to inflation, the private sector of the economy can be restored. Large companies during such a period will not accumulate funds, but will look for promising areas for investment.
Saving during inflation is useless, so people will spend a lot more, which will help many companies increase profits. Often the government curbs inflation and this blocks economic activity.
The main thing is not the phenomenon itself, but its specificity. Although whether this or that level of inflation is good is determined by the general economic situation.
Dealing with deflation is especially difficult for countries with weakened economies and large debts. If people expect prices to fall further, their biggest purchases will be put off until later. And if inflation rises slightly, the number of purchases and citizens’ incomes will also increase. Therefore, many countries benefit from increased inflation.
Now let's move on to a specific example.
In the post-crisis period, in 2009, our country experienced the lowest inflation rate - less than 4%
This was a temporary phenomenon associated with a decrease in demand for many goods. But subsequently prices accelerated again. In addition, lending interest rates fell in 2009. Banks are struggling to find a sufficient number of borrowers. In subsequent years, inflation increased, thanks to which the economy revived.
A moderate level of price increases not only increased demand, but also stimulated investment, increased production levels, and reduced unemployment. The latter is very important. According to economists, the government should pay much more attention to the problem of unemployment.
So, too low an inflation rate is dangerous by cooling the economy. At the same time, too rapid price increases are also very fraught with social and economic instability. The emergence of structural inflation is doubly dangerous.
2 Measuring inflation, consumer price index as a way to measure inflation. Application of the consumer price index or why do we need a consumer price index? The relationship between the consumer price index and the consumer basket.
Inflation is measured using index consumer prices, which is calculated in relation to the base year. The inflation rate can be determined as follows:
Inflation rate = Current year price index – Base year price index / Base year price index X 100%.
Example of calculating the consumer price index
Using the data in the table, calculate the consumer price index for 1990 (base year 1970).
Prices for consumer goods
|
Name |
Price, monetary units |
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1. Shirts (pcs.) |
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2. Bread (kg) |
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3. Notebooks (pcs.) |
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4. Meat products (kg) |
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5. Fish products (kg) |
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6. Pants (pcs.) |
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7. Socks (pcs.) |
Solution. The consumer price index is calculated using the formula: Price index = 
,
where P 1 – price in 1990;
P 0 – price in 1970; Q 1 – quantity of goods.
Index (25x2)+(2x25)+(7x12)+(8x25)+(6x10)+(30x3)+(1.2x5)
prices = ———————————————————————— =
(10.6x2)+(0.6x25)+(2x12)+(3x25)+(2x10)+(0.2x5)
From the above it can be concluded that, consumer price index(Consumer Price Index, CPI) is an integral indicator characterizing the dynamics of changes in the price level for a number of goods and services over a specified period. Another name for this parameter is inflation index. Among specialists, the abbreviation CPI, CPI (Core CPI) is often used to denote this indicator. This indicator is mainly expressed as a percentage.
Application of the consumer price index
It is usually used as statistics designed to identify general dynamics price increases as well as to assess the effectiveness of monetary policy in the state.
Other uses of this indicator: adjustment of payment obligations under lease agreements, contract agreements, as well as state social benefits, insurance payments and in other cases. The methodology for calculating the Index is recommended as follows: international organizations, like the IMF, EBRD and UN.
The relationship between the consumer price index and the consumer basket
When calculating the consumer price index, the cost of those goods and services that make up consumer basket. It includes a set of food products, non-food products and services required to maintain a certain standard of human life. This list is approved at the legislative level and in different countries lists may differ significantly from each other. In Russia, the consumer basket includes 156 items, for comparison in the USA - 300, in the UK - 350, in Germany - 475.
The price level is fixed at the end points - retail stores and other trading establishments. The cost of a set of services is determined on the basis of the actual costs of the population based on payments for them, which are made in accordance with the established tariffs. The collection of information necessary for making calculations is carried out by employees government agencies statistics. The CPI in many countries is the official measure of inflation over a given period.
3 Consumer basket. Definition. Compound. Degree of PC objectivity
A consumer basket is a certain set of goods and services that provide comfortable and full-fledged living for a person throughout the year and satisfy his minimum needs. The composition of the consumer basket directly determines the cost of living, which is revised every year depending on the price level.
What is included in the consumer basket in 2016?
On January 1, 2013, a new consumer basket came into force and will be in effect until 2018.
The consumer basket primarily includes food products, which make up about 50% of its cost (for comparison, in Western European countries, this figure does not exceed 20%). It is worth mentioning that most Russian families They also spend more than half of the family budget on food.
The second group includes non-food products - clothing, shoes, hats, linen, medicines.
Well, the third group of the consumer basket consists of services: public utilities, transportation costs, cultural events, etc.
So, if you look at the table below, which presents the products and services included in the consumer basket for 2016, you will be convinced that, according to government calculations, a working-age citizen consumes 100.4 kg per year. potatoes, 114.6 kg. vegetables, 60 kg. fresh fruit, 126.5 kg. bread and bakery products, 58.6 kg. meat and 18.5 kg of fish products, respectively. Cultural services make up 5% of total monthly expenses.
What does this mean per person per day? This means that the ordinary average citizen Russian Federation for a normal existence, one must consume 300 g of bread per day, potatoes - 280 g, vegetables - 300 g, fresh fruits - 160 g, sweets - 60 g, milk and dairy products - 800 g, vegetable oil and fats – 40 g. And also eat one egg every 2 days, be content with 160 g of meat per day, and eat 350 g of fish per week. As for cultural development, here an able-bodied Russian citizen has the chance to go to the cinema or theater once a month for his subsistence minimum; there is no money provided for more for these purposes.
Degree of PC objectivity
How much is a PC valued in 2016?
No less interesting is the cost of the consumer basket. According to expert estimates, the cost of a PC in the new year is set at 10,000 rubles. However, you need to remember that much depends on the specific region for which calculations are made, as well as on the store in which the established set of products was purchased. For example, if the purchase took place in economy class stores, then the cost of the PC may be about 5,000 rubles.
On average in Russia, food consumption is $90 per person per month, while personal income is about $300. In Moscow the level of consumption is much higher. It amounts to $150-200 per person per month, showing a growing trend.
The highest levels of food consumption are naturally always demonstrated by countries with the highest per capita income. The average US resident consumes $450 worth of food each month. At the same time, a growth trend to 480-500 dollars is visible, with a monthly income of up to 1700-1900 dollars per person. It depends on cultural characteristics, the tax burden, and other reasons. For example, in most European countries consumption is up to 200-250 dollars per month.
Thus, we can conclude that the composition and cost of the consumer basket are removed from the real people's needs, and does not objectively reflect the situation.
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 by taking 265 goods and services from 85 cities in the country as a basis. In Russia, when calculating, we take the consumer basket, the composition of which is approved by 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.
If we assume that the consumer basket includes only three types of goods, then an example of calculating the indicator will look as shown in the table below.
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 the recalculation of 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. For example, when calculating the CPI, only a small and limited number of goods that fall within the minimum level of consumption will be taken into account. Based on this, the price change index will be much lower and wage growth will not compensate for the rise in inflation, which may reduce incentives to work. A similar situation can happen if, for example, the consumer basket includes goods that were produced within the country. IN similar situation, with a high level of centralization, it is necessary to redistribute the rise in prices for consumer goods. For example, between goods such as Kalashnikov assault rifles and tarpaulin boots, the prices of which can be artificially reduced by the government of the country.
The calculation method itself also plays an important role. For example, consider the following method for calculating the consumer price index, which is correct from a mathematical point of view and is even recommended for calculating the CPI, but gives a slightly different result than in the case shown above. The formula looks like this:
By determining the share of each group of goods included in the usual consumer basket and substituting prices into the formula, we get:
When calculating indices, statistical accuracy entails the creation of a single base and therefore the consumer price index in a country is based on a single base, which represents the base year's production volume or common 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. For example, a car from 1960 and a car from 1990 differ significantly in their quality characteristics.
Inflation – is a sustained increase in the general level of prices for goods and services in the economy. The reverse process - a decrease in the general price level - is called deflation.
Consumer Price Index as an Inflation Indicator
Various price dynamics indicators– producer price indices, gross domestic product deflator, consumer price index. When people talk about inflation, they usually mean the consumer price index (CPI), which measures the change over time in the cost of a set of food, non-food goods and services consumed by the average household (i.e., the cost of the “consumer basket”). The choice of the CPI as the main indicator of inflation is associated with its role as an important indicator of the dynamics of the cost of living of the population. In addition, the CPI has a number of characteristics that make it convenient for widespread use - simplicity and clarity of the construction methodology, monthly calculation frequency, and prompt publication.
The periods over which the CPI is measured may vary. The most common comparisons of the level of consumer prices in a certain month of the year with their level in the previous month, the corresponding month of the previous year, December of the previous year.
Statistical observation of prices, necessary calculations and the publication of data on the CPI in Russia is carried out by the Federal State Statistics Service.
Features of the Russian consumer basket
In Russia, as in countries with emerging markets in general, a characteristic feature of the consumer basket is a fairly high share of food products in it (in 2014 - 36.5%). Their prices are quite variable. To a large extent, fluctuations in inflation in the food market are determined by changes in supply volumes, primarily, agricultural crop yields in our country and in the world, which significantly depend on weather conditions. Since the share of food products in the consumer basket is high, fluctuations in their prices can have a significant impact on inflation as a whole.
Another feature of the Russian consumer basket used to calculate the CPI is the presence of goods and services in it, the prices and tariffs of which are subject to administrative influence. Thus, the state regulates tariffs for a number of services utilities, passenger transport, communications, some others. In addition, prices for tobacco products and alcoholic beverages significantly depend on excise tax rates.
Consumer demand is satisfied through goods and services of both domestic and foreign production. There are no statistical data on the share of imports in the CPI, but an idea of it in terms of goods can be given by the share of imports in the structure of commodity resources retail(in recent years - about 44%). The significant share of merchandise imports in the consumer basket determines the significant impact of changes in the ruble exchange rate on inflation.
Inflation factors
Prices may rise faster or slower. In the first case, they talk about an increase in inflation, in the second – about its decrease. There are various reasons for changes in inflation. Let's look at them using the example of accelerating price growth. If the level of demand for goods and services exceeds the ability of supply to satisfy it, they speak of a pro-inflationary effect demand side factors. In some cases, the rapid growth of demand may be affected by too accessible loans and accelerated growth of nominal incomes of economic entities. Often these sources of excess demand are called "monetary factors of inflation"- pressure on prices due to the creation of excess money.
Inflation can also rise when an imbalance in the market for a product or service arises due to insufficient offers, for example, due to crop failure, restrictions on the import of products from abroad, or the actions of a monopolist.
Inflation can be caused by growth costs for the production and sale of a unit of product - due to rising prices for raw materials, materials, components, increased enterprise costs for wages, taxes, interest payments and other costs. Increasing costs can also lead to a decrease in production volumes and, further, to the formation of additional pro-inflationary pressure due to insufficient supply.
An increase in prices for imported cost components may be due to both an increase in world prices and a depreciation of the national currency. In addition, the weakening of the national currency can directly affect the prices of final products imported from abroad. The overall effect of a change in the exchange rate on price movements is called "carryover effect" and is often considered as a separate factor of inflation.
Economic theory identifies as a special factor inflation expectations– assumptions regarding the level of future inflation, formed by economic entities. The expected rate of inflation is taken into account by producers when making decisions regarding setting prices for their own products, wage rates, determining production volumes and investments. Households' inflation expectations influence their decisions about how much of the funds at their disposal to allocate to savings and how much to consumption. The decisions of economic actors affect the supply and demand of goods and services and, ultimately, inflation.
Negative consequences of high inflation
High inflation means a decrease in the purchasing power of the income of all economic entities, which negatively affects demand, economic growth, the standard of living of the population, and public sentiment. Depreciation of income reduces opportunities and undermines incentives to save, which prevents the formation of a stable financial basis for investment. In addition, high inflation is accompanied by increased uncertainty, which makes it difficult for economic actors to make decisions. All together, this negatively affects savings, consumption, production, investment and, in general, the conditions for sustainable economic development.
Benefits of Price Stability
Price stability means maintaining low growth rates in consumer prices, which economic actors neglect when making decisions. In conditions of low and predictable inflation, the population is not afraid to save in national currency for long periods, since they are confident that inflation will not depreciate their deposits. Long-term savings, in turn, are a source of financing investments. In conditions of price stability, banks are ready to provide resources to borrowers for long periods at relatively low rates. Thus, price stability creates conditions for increased investment and, ultimately, for sustainable economic development.
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 research have been going on 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?
Most controversial issue In the methodology for determining the CPI, the question currently remains 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 used for calculations, the parameters of which were approved by Federal Law No. 44, and, by the way, amendments were made to it in last time 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.
- The CPI includes only so-called final consumer goods, and for calculating the deflator, any final services and goods included in GDP are important.
- 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 is of great benefit to 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 wages 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.