What is CPI?

The Consumer Price Index (CPI) is a relative figure that reflects the trend and magnitude of change in the price level of goods and services purchased and used for consumption by residents. The index includes the prices of all kinds of consumer goods needed by urban and rural residents in their daily lives, as well as the prices of a variety of services closely related to people's lives, such as water, electricity, transportation, education, medical care, etc., which can comprehensively reflect a variety of market price factors and their impact on the actual life of the residents. This price index provides a scientific basis for analyzing and formulating monetary policy, price policy, consumer policy, social security policy, wage policy and national economic accounting, and is also one of the four major macro-control indicators. Internationally, CPI is usually used as an important indicator to reflect the degree of inflation (or deflation). Therefore, CPI has become the focus of social attention. Due to people's different understanding of the statistical method and system of CPI, it has sometimes caused some arguments and disagreements. First, the CPI measures the overall trend of the consumer price situation in a country or region, often inconsistent with people's actual feelings. Some people say that our government published CPI data, often with people's actual feelings about prices are very different, what is this all about? In fact, first of all, the CPI is an aggregate indicator, which reflects the total price level of consumer goods and services for the whole country, which may not be the same as the feeling of each region or even each resident; secondly, the CPI is a measure of price changes of a representative group of consumer goods and services, and the survey of China's consumer prices is divided into food, tobacco, alcohol, and supplies, clothing, household equipment and services, medical care and personal goods, health care and personal goods, and food, alcohol, and supplies, and household equipment and services. China's consumer price survey is divided into eight categories: food, tobacco, alcohol and supplies, clothing, household equipment and services, medical care and personal goods, transportation and communication, entertainment, education and cultural goods and services, and housing. According to the consumption structure and habits of China's urban and rural residents, and with reference to the consumption expenditure data of nearly 120,000 urban and rural households selected on the principle of sample surveys, and in combination with other relevant information, 251 basic classifications and about 700 specification varieties were selected as regular survey items. However, no matter how representative these households and survey items are, they cannot be a true reflection of each individual's consumption, that is to say, the varieties and weights of goods and services consumed by each individual cannot be the same as those in the statistical survey conducted by the National Bureau of Statistics, e.g., rural residents' consumption of food items accounted for a larger share of the total, and urban residents' consumption of recreational, educational and cultural goods and services and residential items accounted for a larger share of the total, so that individuals' price perceptions are not as high as they should be. Some, therefore, personal feelings about prices and the CPI index must have some differences; Third, everyone's income level is different, the affordability of prices is not the same, which also caused the residents of the changes in prices do not feel the same. The same thing, some people feel expensive, and some people feel very cheap. Therefore, the CPI is a measure of the consumer price situation in a country or region, a general trend. Second, in order to facilitate the comparability of indicators, the current statistical system in China does not list the price of commercial housing in the scope of the CPI, which is reasonable. At present, I am afraid that the most controversial CPI is whether the price of commercial housing should be counted in the CPI. From the statistical system, due to the purchase of commercial real estate in the statistical grouping of the investment category, not included in the scope of the survey of consumer price index, but reflect the price changes in residential rent, construction materials, housing loan interest rates and property costs are included. Many experts are skeptical of this grouping, due to the rapid rise in commodity housing prices in recent years, in terms of wages and house price ratio, beyond the affordability of the ordinary working class, the formation of a greater pressure on the lives of the residents and consumption, but this commodity housing prices are not counted in the CPI, and therefore, many believe that underestimates the rise in the CPI. As we all know, the commodity housing is a one-time investment, multi-year consumption of commodities, from the international perspective, commodity housing is generally not included in the scope of the survey of consumer price index, in order to facilitate the comparability of indicators, the current statistical system in China also does not have the price of commodity housing listed in the scope of the CPI, which is reasonable. Investment in real estate and investment in stocks, we can not put the fluctuations in stock prices are also counted in the CPI, right? Of course, we also have to recognize that the situation in our country and abroad is still very different, our country in the past a long time to housing in the category of employee benefits, distorting the price of housing, and then advocate "Home Ownership Scheme", and make every effort to allow everyone to have a home, whether it is the city or the countryside, have a set of housing is a lifelong struggle of the residents of the goal! Many people spend their entire lives saving and eating less just to get a home, which has led to a highly developed market for the purchase and sale of commercial housing and a sluggish market for the rental of commercial housing. In addition, due to a variety of reasons, such as household registration, China's population mobility is still not great, also affects the development of the housing rental market. Therefore, in our country, the impact of house rental and house purchase and sale on residents' consumption of residential commodities should be studied more y. It is also believed that the purchase of commercial housing is consumption or investment, mainly depends on the use of the purchase of commercial housing, is consumption is consumption, is investment is investment, how to solve this problem, really need to be seriously studied. How to understand the relationship between PPI (Producer Price Index) and CPI (Consumer Price Index), there are also different views at present. In recent years, the PPI rise has been high, while the CPI is Kai and not moving, always hovering at a low level, a puzzling phenomenon, theoretically speaking, production and consumption are the two endpoints on the chain of economic operation, generating the price index mainly reflects the price changes in the field of production, that is, source and intermediate commodities price changes in the price of goods in the price conduction system in the upper and middle reaches of the price; Consumer Price Index The consumer price index mainly reflects price changes in the field of consumption, i.e. price changes in final consumer goods and services, and is at the downstream and terminal of the price transmission system. The continuous increase in the prices of upstream commodities will gradually be transmitted to the price changes of downstream commodities. According to the empirical data analysis of the past 20 years, the time lag of such transmission is about one and a half years. However, in reality, this price transmission is far less direct and intuitive than we think. Whether price increases in certain upstream commodities can be transmitted to the downstream mainly depends on the supply and demand situation of such commodities, the elasticity of supply and demand, and the length of the industrial chain. In recent years, there have been some new changes in the price transmission relationship between upstream and downstream commodities, manifested in the prolongation of the transmission time lag, weakening of the transmission effect, and in some cases, even the transmission of "obstruction" and so on. In addition, with the continuous expansion of foreign trade, economic integration and market integration trend in the strengthening of the price transmission process, there may also be a "spillover effect", that is, enterprises through the thin margins, expanding exports and other ways to digest. For example, in the past two years, steel prices soared, but steel as the main raw material for automobiles, home appliances prices fell instead of rising, which shows that, in the current buyer's market, the decision to price is not the cost but supply and demand. Third, GDP deflator instead of CPI has limitations, its scope is too broad, timeliness and sensitivity is poor. Since the changes in the CPI seem to fall short of people's expectations, it has been suggested that the GDP deflator should be used to replace the CPI as a measure of inflation.The GDP deflator is an economic index that measures the degree of change in the aggregate price level of final goods and services produced in a country over a period of time, calculated by comparing the GDP at the prices of the reporting period with the GDP at constant prices. It is calculated by comparing GDP at reporting period prices with GDP at constant prices. As the index covers the widest range of goods and services, including not only all material products and covering all service products counted in GDP, but also imported and exported goods, it is theoretically the most comprehensive indicator reflecting changes in the aggregate price level. At present, the GDP deflator is significantly higher than the CPI, which seems to be closer to people's real feelings, therefore, some people propose that the GDP deflator should replace the CPI as the main indicator of inflation, but in fact, there are some shortcomings in the GDP deflator: for example, it is too broad in scope, and it includes the prices of investment and export commodities, which are not directly relevant to the consumers, and it also includes the prices of goods that are not traded in the market. estimates of goods and services that are not traded in the market, mainly for government services. In addition, the compilation of this index requires the collection of a large amount of information, the real GDP is extrapolated using price indices of various industries, which can only approximate the total price index reflecting the change in the price level of various industries, and it is published once a year, which is poor in terms of timeliness and sensitivity. On the other hand, the survey content of the consumer price index covers consumer goods and services consumed by residents in their daily life, which can comprehensively reflect the fluctuation of consumer prices and its impact on residents' actual cost of living expenditures as affected by changes in a variety of market factors. The degree of change in the consumer price index to reflect the degree of inflation has become a general rule of international common, with good international comparability. Fourth, CPI analysis and forecasting in the "tail factor" can not be ignored. In the CPI analysis and forecasting, "tail factor" is also a non-negligible problem. Usually, people use the price of the same period last year as a comparison of the base period of the year-on-year price index to reflect the degree of change in the total price level. This year-on-year index is not all reflect the actual price increases, it contains "tail factor" and "new price factors" two parts. The so-called "tailing factor" refers to the lagging effect of the previous year's price increases on the current year. If the previous year's prices were low and then high trend, then the "tail factor" for the positive impact, and vice versa for the negative impact. Such as in 2003, China's consumer prices were low before the high trend, its 2004 "tail" effect as high as 2.2 percentage points, accounting for 56.4% of the total increase in annual consumer prices. In 2004, prices were low at both ends and high in the middle, and their impact on the 2005 "tail" was only 0.8 percentage points. Therefore, in 2005, the total price level, "new price factors" will play a decisive role, which is also our analysis and forecast of price trends should be considered an important factor. CPI has become an important basis for the formulation of our macro-policy, but CPI is a frequently changing indicators, CPI changes with the stability of the policy has a certain contradiction, CPI changes in how much policy needs to be adjusted? This requires in-depth study, the following schedule is some of the foreign experience data. As can be seen from the attached table, for the long-term inflation target, developed countries are generally in the 1%-3%, but emerging market economies are generally slightly higher than this. This depends on the structure of the country's economy and its degree of development, as well as the country's ability to regulate the macroeconomy. What is the target range in China, the state has not announced. Some experts believe it is 1-5%. Not long ago, American economist Prescott, winner of the 2004 Nobel Prize in Economics, gave a lecture on economic cycles at Peking University, in which he specifically affirmed that his theories are not yet applicable to China for the time being, indicating that the situation in China may be much more complicated. China's inflation target range still needs further study by experts and scholars