In layman's terms, what do you understand by CPI? What does it mean? The following is what I have organized for you to say what is the meaning of cpi in layman's terms, for your reference!
What does cpi mean in layman's termsCPI is the consumer price index (consumer price index) for short.
It is a measure of the price level of a representative group of consumer goods and services over time and changes in the relative number, is used to reflect the price level of consumer goods and services purchased by households to change.
The concept of CPI(1) The basic definition of CPI
CPI is the English abbreviation for consumer price index, which is usually referred to as the consumer price index in China. In 1944, China canceled the compilation of the cost of living price index, and began to officially use the consumer price index. CPI is a relative number reflecting the level of change in the price level of a representative group of goods and services purchased by residents and used for consumption and the trend of change, and it is the result of a comprehensive summary of the consumer price index for urban residents and the consumer price index for rural residents. Because of the difference in the comparison base period and the hierarchy of index aggregation, the compilation of China's CPI currently includes the following series of indicators: the average price of representative specifications, the price of representative specifications of individual indices, the monthly basic classification price index, the monthly price of various categories of price indexes, aggregated price indexes of the fixed base, monthly indexes, month-on-month indexes, cumulative year-on-year indexes, and the indexes of the previous year's prices for the base period of December. .
(2) The main uses of the CPI
In general, the CPI has three main uses:
First, as a measure of inflation or contraction of the economic indicators, often used to measure the economy as a whole of the general inflation, for the country's macro-control to provide a basis for decision-making. One of the characteristics of inflation (or tightening) is the price level continues to generally rise (or fall), when the price level changes are generally described by the CPI. Therefore, CPI is the measure of inflation (or tightening) the main economic indicators, but also China's macro-control management is an important reference.
Second, it is used in national economic accounting. In the process of accounting for GDP, in order to eliminate the influence of price factors, the CPI is used to deflate the final current price consumption to get the final consumption of households at constant prices.
Thirdly, it is used for indexation adjustments. CPI is usually used to adjust monetary flows such as wages, interest, rents, taxes, etc.
Adjustments are made to deflate expenditures or monetary incomes at current prices to partially or fully compensate for changes in the prices of consumer goods and services or in the cost of living, and to measure the true state of consumption and income. The CPI can also be used to adjust the capital value of certain monetary assets and liabilities, or to calculate the purchasing power parity of household consumption expenditures.
Introduction to the compilation of the CPI
The main aspects of the compilation of the CPI include: the definition of the product basket - the collection of price data - the collection of weighting information - the choice of compilation methodology - the necessary adjustments to the compilation of the CPI index.
(1) Determination of the product basket. The national CPI covers the prices of food, housing, tobacco, alcohol and supplies, clothing, household equipment supplies and maintenance services, health care and personal goods, transportation and communications, entertainment, education and cultural goods and services, and other eight major categories, 39 middle categories, 262 basic classifications, and more than 600 types of commodities and services consumed by urban and rural residents across the country. House prices are not included in the CPI statistics is the international practice, in the preparation of China's CPI for the residential category of own housing is the use of the cost method, that is to say, living in the own housing consumption with the estimated rent of the housing to reflect.
(2) Price data collection. The data came from more than 500 cities and counties in 31 provinces (autonomous regions and municipalities), 63,000 national CPI price collection survey outlets, including grocery stores, department stores, supermarkets, convenience stores, specialty markets, specialty stores, shopping centers, as well as farmers' markets and a variety of services and consumer units, with a survey coverage of 130,000 households. The specific sampling survey method is to select a group of residents in a certain period of time, frequent consumption, a large impact on the lives of residents, representative of the goods and services, the use of "fixed-person, fixed-point, fixed-time" approach to send surveyors directly to the survey. The way to send surveyors directly to the survey network to collect the prices of various goods and services to summarize the calculation of price indices at all levels. Fixed-person" means that the same enumerator will collect prices of various goods and services at the same time. This means that the same surveyor surveys the same goods and services within a certain period of time, and the same surveyor collects the prices of the same goods and services at the same time. Fixed-point This means that the surveyor collects prices at a fixed point, and that the surveyor collects prices at a fixed time. Timing means that the surveyor to investigate the price of a specific time is determined.
(3) the collection of weights, the weights in the CPI, refers to each major category of goods and services in the proportion of consumer spending on all goods and services in the total expenditure of residents. The weights of each item in China's CPI are mainly determined based on the detailed weights of the expenditures of each type of goods and services of 130,000 urban and rural households nationwide. Based on the 2010 national survey of urban and rural residents' consumption expenditures as well as the statistical data from the relevant departments, China made routine adjustments to the composition of the CPI weights in 2011 in accordance with the regulations of the routine system.
(4) CPI compilation methods. China's current monthly compilation of the CPI has two calibers: one is the year-on-year CPI, which is based on the same period of the previous year, reflecting the price changes of a cycle year; and one is the ring CPI, which is based on the previous period (month)
and can quickly reflect sudden price changes in a short period of time.
The formula for calculating the CPI is CPI = (?). The CPI is calculated as follows: CPI = (?) value of a group of fixed commodities at current prices / value of a group of fixed commodities at base period prices) X 100%.
The average price of representative specifications in accordance with the simple arithmetic mean method, the sample data at different points in a month for the average obtained;
The price of representative specifications of individual indices directly with the average price of the reporting period divided by the average price of the base period to get; monthly price index of the basic classification in accordance with the method of geometric averaging that is, the formula for the Jevons index;
The reporting month fixed-base index = reporting month ring prices / the value of a group of fixed goods at current prices) X 100%. Monthly base index=Reporting month index? previous month's base index;
Monthly base index - ?Wt-1Pt/Pt-1, where Wt-1 is the reporting month's weight, and Pt, Pt-1 are the reporting month's and previous month's
prices respectively;
Same-month index = Reporting month's base index? the same month fixed index of the previous year;
Cumulative average index = the sum of the fixed index of each month of the current year? the sum of the fixed base indices for each month of the same period of the previous year, or the cumulative average for the year when the reporting period is December;
Specified Comparison Period Index = Reporting Month Fixed Base Index? December fixed-base index of the previous year;
Among the above indices, the fixed-base index is compiled using the chained pull-type index method, which is recommended by the United Nations in the 1993 SNA and is scientific in nature. The calculation methods of the basic classification index and the annual average index are not in line with the principles of index compilation.
Questioning the current CPI calculation methodology
(1) Improved annual price index calculation methodology.
According to the "Consumer Price Index Statistical Survey Program", China's annual price index is calculated by the monthly price index is directly converted from the formula:
I year = the average of the cumulative base index of the previous year / the average of the cumulative base index of the current year
The numerator denominator in the above formula is calculated using the method of simple arithmetic averaging, respectively. Using this method, the conversion from monthly data to annual data is relatively simple, but the use of arithmetic averaging to average the relative numbers is contrary to the basic principles of statistics, which is puzzling, and the results of the calculations have no practical significance.
We propose to use a new method of calculation, the formula is:
I year for a basic classification of the annual price index; Pi is the annual average price of the commodity in the ith year, t
is the reporting year,
t-1 is the year before the report; Wi is the weights. Using the above steps to calculate the annual price index, although the amount of calculation
is large, but its meaning is clear, in line with the basic principles of statistics.
(2) Adjust the weights and types of sub-items of the residential category
Add the expenditure on residential housing to the residential category sub-items and increase the weights of the residential category according to its share in the national consumer expenditure.
CPI Consumer Price Index (CPI)A macroeconomic indicator of changes in the price level of consumer goods and services generally purchased by households. It is a relative measure of the change in the price level of a representative set of consumer goods and services over time, and is used to reflect changes in the price level of consumer goods and services purchased by households.
Consumer price statistics survey is the final price of social products and services, on the one hand, closely related to the life of the masses, but also in the entire national economy price system has an important position. It is an important indicator for economic analysis and decision-making, price level monitoring and regulation and national economic accounting. Its rate of change reflects, to a certain extent, the degree of inflation or contraction. Generally speaking, prices across the board, a sustained increase is considered to have occurred inflation.
1 purpose
CPI is an important economic indicator reflecting changes in the price level of consumer goods and services related to the lives of residents, and an important indicator for macroeconomic analysis and decision-making, as well as national economic accounting. Generally speaking, the CPI directly affects the introduction and strength of the country's macroeconomic control measures, such as whether the central bank adjusts interest rates, whether to adjust the reserve requirement ratio, etc. At the same time, the CPI also has a significant impact on the development of the economy. At the same time, the high and low CPI also indirectly affect the capital market (such as the stock market) changes.
The purpose of compiling the consumer price index is to understand the basic situation of price changes across the country, to analyze and study the impact of price changes on the socio-economic and residents' lives, to meet the needs of governments at all levels to formulate policies and plans, to carry out macro-control and to provide a reference and a basis for the national economic accounting
The Consumer Price Index (CPI) and the Employment Situation Report (Non-Farm Payroll) Combined with the Employment Situation Report (Non-Farm Payrolls), it becomes another popular economic indicator scrutinized in the financial markets because inflation affects everyone by determining how much consumers spend on goods and services, shaping the cost of doing business, greatly undermining personal or business investments, and affecting the quality of life of retirees. Moreover, an outlook on inflation helps establish labor contracts and set government fiscal policy.
The Consumer Price Index (CPI) measures the average change over time in the retail prices of more than 200 assorted goods and services. These 200 goods and services are categorized into eight major groups. In calculating the CPI, each category is given a weight which indicates its significance. These weights are determined by surveying thousands of households and individuals about the products and services they buy. The weights are revised every two years to bring them in line with people's changing preferences.
2 Key Implications
The CPI is a lagging figure, but it is often an important reference for market economic activity and government monetary policy. stable CPI, full employment and GDP growth are often the most important socio-economic goals. However, in terms of China's reality, the stability of the CPI and its importance are not what developed countries believe? have a certain authority, and the economic activities of the market will be adjusted according to the changes in the CPI?
Impact on exchange rates
The impact of inflation on the dollar is less clear. Typically in a healthy economic expansion, raising the interest rate on the dollar can make the dollar more attractive. If the rise in interest rates comes mainly from rising inflation, it will hurt the dollar. Higher inflation hurts the value of dollar investments held by foreigners, so a sustained rise in the CPI has a negative impact on the dollar. Currency traders are also sensitive to other nuances. For example, traders in the foreign exchange market believe that the Fed has acted quickly and flexibly to control inflationary pressures, and that the dollar will probably maintain its value or even appreciate.
3 basic functions
1, measure inflation (deflation). CPI is an important indicator of inflation. Inflation is a general and sustained increase in the price level. the CPI can indicate the severity of inflation at a certain level;
2, national economic accounting. In national economic accounting, the need for a variety of price indices. Such as the consumer price index (CPI), the producer price index (PPI) and the GDP deflator, the GDP accounting, so as to remove the impact of the price factor;
3, contractual indexing adjustment. For example, in salary and compensation negotiations, because employees hope that salary (nominal) growth can be equal to or higher than the CPI, and hope that nominal salaries will be automatically adjusted with the rise of the CPI. The timing of the adjustment is usually after inflation occurs, the magnitude is lower than the actual inflation rate;
4, reflecting changes in the purchasing power of money: the purchasing power of money refers to the number of consumer goods and services that can be purchased with a unit of money. Consumer price index rose, the purchasing power of money is down; the opposite is up. The inverse of the consumer price index is the purchasing power of money index.
5, reflecting the impact on the real wages of workers: an increase in the CPI means a decrease in real wages, a decrease in the CPI means
an increase in real wages. Therefore, the CPI can be used to convert nominal wages into real wages.
6. The impact of CPI on the stock market: In general, prices rise, stock prices rise; prices fall, stock prices also fall.
4 Calculation formula
CPI = (the value of a group of fixed commodities at current prices / the value of a group of fixed commodities at base-period prices)?100%. The use of fixed weights by weighted arithmetic average index formula, that is, K'=?KW/?W, fixed weights for W, where the formula in the numerator of the K for a variety of sales volume of the individual index.
The CPI indicates that for the average household's expenditures, the purchase of a representative set of goods, how much more to spend today than at some time in the past, for example, if the average household in a country in 1995 to buy a set of goods per month for 800 yuan, and the cost of purchasing this set of goods in 2000 for 1,000 yuan, then the country's consumer price index for the year 2000 is (with a 1995 as the base period) CPI= 1000/800?100%=125%, which means it rose by (125%-100%)=25%.
On a day-to-day basis we are more interested in the inflation rate, which is defined as the percentage change in the price level from one period to another, with the formula
where T is the rate of inflation in period t, and Pt and P(t-1) denote the price level in period t (representing the reporting period) and period t-1 (representing the base period), respectively.
If the consumer price index (CPI) introduced above is used to measure the price level, the inflation rate is the percentage change in the CPI from one period to another. For example, if the CPI of an economy increases from 100 last year to 112 this year, then the inflation rate for this period is T=(112?100)/100?100%=12%, which means that the inflation rate is 12%, which is expressed as a 12% increase in prices.
The current CPI index for China is based on the previous year as the base period (100), not on a defined point in history.
5 Derived Meanings
Core CPI, refers to the consumer price index after removing the prices of products that are heavily influenced by weather and seasonal factors. Until 2013, China's core CPI has not been clearly defined, the United States is the fuel and food prices after the removal of the consumer price index for the core CPI.
This approach was first proposed by the American economist Robert J. Gordon in 1975, the background is the United States in 1974-1975 by the first oil crisis The background is that the United States in 1974-1975 by the first oil crisis and the impact of a relatively large amount of inflation, and at that time the rise in consumer prices is mainly affected by the rise in food prices and energy prices. At that time, a number of economists believed that the rise in food prices and energy prices that occurred in the United States was mainly due to the impact of supply factors, and less affected by the demand pull, and therefore proposed a method of deducting the change in food and energy prices from the CPI to measure the change in price level.
From 1978, the U.S. Bureau of Labor Statistics began to publish the rate of increase from the Consumer Price Index (CPI) and the Producer Price Index (PPI) after the exclusion of food and energy prices. However, it is in the U.S. economics community, on whether food and energy prices should be deducted from the CPI to determine the price level, there is still a great deal of debate, and there are many opponents.