Friday, March 13, 2009

measuring inflation

inflation can be measured by measuring the changes in the prices of goods and services . the trouble is that there are thousands of shops and millions of transaction each week.we cannot record each one centrally ! so,the government organizes certain samples in order to publish arrange of statistics called index numbers,in which the prices of (say ) food and housing are more important than the prices of clothing and perfume .there are several indices :
1- General Index of Retail prices (Known as the headling RPI) which uses January 1987 as its base or starting is calculated once amonth and published on atuesday in the middle of the following month.
2- underlying inflation (called RPIX),which is headline RPI excluding interest paid on mortgages . this is the measure which is targeted by the government to be 2.5% pa in about two years time .
3- tax and price index ,also monthly ,which seeks to take in to consideration the changes in take-home pay caused by income tax and national insurance contributions . it tries to measure the purchasing power not of money but of take-home pay .
4- index numbers of producer prices :(a) materials and fuel purchased ,(b) output .these indices seek to measure changes in prices of items long before they reach the shops or are exported
5- average earnings index ,which is usually published about three or four days before the RPI.our earnings are important for two reasons -we spend them and so influence prices ;our employers pay them and so will try to raise prices in order to recoup their extra costs when earnings rise .

No comments: