The Consumer Price Index (CPI) for the first month of 2024 has been released by the National Statistics Office (NSO), the figures that have emerged have show a decline in the numbers, as the combined CPI, that is rural and urban stands at 5.1 per cent. In December 2023, the combined CPI stood at 5.55 per cent.
What is Consumer Price Index
There are many economic rubrics, that are used to understand the complex world of economics, the Consumer Price Index (CPI) is one such rubric of the average change in price over time for a market basket of consumer goods and services. The CPI is a widely used to gauge inflation.
The Consumer Price Index (CPI) is derived by assessing a representative selection of goods and services, encompassing items such as food, automobiles, and rent. This primary deployment of this parameter is done to measure and monitor fluctuations in the purchasing power of a nation's currency and tracks variations in the price level of the specified basket of goods and services over time.
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The formula to calculate CPI is as follows:
CPIt= Ct /C0 * 100
Here
CPIt = consumer price index in current period
Ct = cost of market basket in current period
C0 = cost of market basket in base period
An increase in CPI means, that there is an average increase in the price of the commodities, that in turn means, that individuals will have to shell more resources than before to buy the same product, this could indicate inflation in the system.
On the other hand, a drop in CPI could indicate that the average prices have reduced over a period, with greater supply in place, the demand goes down, thereby paving way for deflation. Deflation could also be in place because of reduction in the purchasing power of the population due to other factors.
January 2024 Number in Context
The Rural CPI, taking rural territories into consideration January stood at 5.34 per cent, compared to 5.93 per cent. On the other hand, The urban inflation stood at 4.92 per cent, a significant drop from 5.46 per cent. Factors involving food, automobiles, and rent and the individual's capability to pay for the same has placated the numbers
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