CPI is the consumer price index.
Consumer price index (CPI) is a measure of the price of a fixed basket of consumer goods, which mainly reflects the price changes of goods and services paid by consumers, and is also a tool to measure the level of inflation, expressed as percentage changes. In the United States, the main commodities that constitute this indicator are divided into seven categories, including: food, wine and beverage houses; Clothing; Transportation; Medical and health care; Entertainment; Other goods and services. In the United States, the consumer price index is released by the Bureau of Labor Statistics every month, and there are two different consumer price indexes. One is the consumer price index for employees, or CPI-W for short, and the other is the consumer price index for urban residents, or CPI-U for short.
Reference index
(CPI) is a lagging data, but it is often an important reference index for market economic activities and government monetary policy. CPI stability, full employment and GDP growth are often the most important social and economic goals. However, from the reality of China, the stability and importance of CPI are not as authoritative as the developed countries think, and the economic activities of the market will be adjusted according to the changes of CPI. In recent years, the GDP growth of European and American countries has been fluctuating around 2%, and the CPI has also fluctuated between 0% and 3%, while the situation in China is completely different. The first is the rapid growth of the domestic economy. In the past two years, GDP growth has been above 9%, but CPI fluctuates little. On the surface, it can be said that "the government freely regulates the economic operation and the market behavior is very rational". Second, within one year, CPI fluctuated greatly, with a difference of several percentage points; Under normal circumstances, unless there is a major emergency in economic life (such as the Asian financial crisis of 1997), it is impossible for CPI to fluctuate greatly, so CPI in China fluctuated abnormally in 2004. Third, with the sharp fluctuation of CPI, the domestic economic inflation rate was once too high, and the negative interest rate of people's savings was serious. For a time, residents' savings bid farewell to negative returns, and the shadow of deflation reappeared. Such an economic environment is worrying, so how to understand the CPI index has become a very important issue.
computing formula
The calculation formula of CPI is CPI= (the value of a set of fixed commodities at current prices) divided by (the value of a set of fixed commodities at base prices) multiplied by 100. CPI tells people how much it costs to buy a representative group of goods today than at some time in the past. For example, if the average family in a country spends 1.995 on a group of goods in 800 yuan every month, and in 2000 it spent 1.000 on this group of goods, Then the consumer price index of this country in 2000 is (based on 1995) CPI =1000/800 *100 = 654330. In our daily life, we are more concerned about the inflation rate, which is defined as the percentage of price changes from one period to another. The formula is t = (P 1-P0)/P0, where t is the inflation rate in the period of 1, and P 1 and P0 represent the price level in the period of 1 and P0 respectively. If the above-mentioned consumer price index is used to measure the price level, then the inflation rate is the percentage of changes in the consumer price index in different periods. If the consumer price index of an economy increases from 100 last year to 1 12 this year, then the inflation rate in this period is t = (112-100)/1.
Relevant explanation
Market sensitivity: very high.
Meaning: A very popular economic indicator to measure the price inflation of retail goods and services.
Website for news release: www.bls.gov/cpi Homepage Website: www.bls.gov Release Time: 8: 30 am EST; Published in the second or third week of the reporting month.
Frequency: once a month.
Source: Bureau of Labor Statistics, Ministry of Labor.
Revision: There is no monthly revision. The annual change will come out when the GDP data of February 1 month is released. The revision can be traced back to five years ago.
Why it matters: Combined with the employment situation report (non-agricultural), the consumer price index (CPI) has become another hot economic indicator that has been carefully studied in the financial market. The reason for its concern is obvious: inflation affects everyone, it determines the cost of consumers to buy goods and services, affects the operating costs of enterprises, greatly damages the investment of individuals or enterprises, and affects the quality of life of retirees. Moreover, the prospect of inflation is conducive to the establishment of labor contracts and the formulation of government fiscal policies.
What is the consumer price index? It measures the average change of retail prices of more than 200 kinds of goods and services over time. These more than 200 kinds of goods and services are divided into 8 categories. When calculating the consumer price index, each category has a weight that can show its importance. These weights are determined by investigating the products and services purchased by thousands of families and individuals. The weights are revised every two years to make them conform to people's changing preferences.
Impact on exchange rate: The impact of inflation on the US dollar is unclear. Usually, in a healthy economic expansion, raising the interest rate of the US dollar can make the US dollar more attractive. If the rise in interest rates mainly comes from the rise in inflation, it will hurt the dollar. The high inflation rate has damaged the value of dollar investment held by foreigners, so the continuous rise of CPI has a negative impact on the dollar.
Foreign exchange traders are also sensitive to other nuances. For example, traders in the foreign exchange market believe that the Federal Reserve has acted quickly and flexibly to control inflationary pressure, and the dollar may maintain its value or even appreciate.
Core CPI
The so-called core CPI refers to the consumer price index after excluding the product prices that are greatly affected by climate and seasonal factors. At present, China has not clearly defined the core CPI, while the United States takes the consumer price index after deducting the prices of fuel and instruments as the core CPI. This method was first put forward by American economist Robert J Gordon in 1945. Its background is that under the influence of the first oil crisis of 1974-1975, the United States experienced a great inflation. At that time, the rise in consumer prices was mainly affected by the rise in food prices and energy prices. Of course, the company will go all out. At that time, many economists believed that the rise of food and energy prices in the United States was mainly affected by supply factors and less by demand. Therefore, the method of deducting food and energy price changes from CPI to measure price level changes is put forward. Starting from 1978, the Bureau of Labor Statistics of the United States began to announce the rising rate after excluding food and energy prices from the consumer price index and producer price index (PPI). However, even in American economic circles, there is still a big debate on whether food and energy prices should be deducted from CPI to judge the price level, and there are many opponents.
The significance of CPI
The CPI price index is very important and enlightening, so we must grasp it carefully, because sometimes it is announced that the index is rising, the currency exchange rate is improving, and sometimes it is the opposite. Because the level of consumer price index shows the purchasing power of consumers and also reflects the economic prosperity, if the index drops, it reflects the economic recession, which is bound to be unfavorable to the trend of currency exchange rate. But if the consumer price index rises, will the exchange rate be favorable? Not necessarily, it depends on the "increase" of the consumer price index. If the index rises moderately, it means that the economy is stable and upward, which is of course beneficial to the country's currency. But if the index rises too much, it will have a negative impact, because the price index is inversely proportional to purchasing power. The more expensive the price, the lower the purchasing power of the currency, which is bound to be unfavorable to the country's currency. If the impact on interest rate is considered, the impact of this indicator on foreign exchange rate is more complicated. When a country's consumer price index rises, it shows that its inflation rate rises, that is, its currency purchasing power weakens. According to purchasing power parity theory, its currency should weaken. On the contrary, when a country's consumer price index drops, it shows that the country's inflation rate drops, that is, the purchasing power of money rises. According to the purchasing power parity theory, the country's currency should appreciate. However, because all countries take controlling inflation as their primary task, rising inflation also brings opportunities for rising interest rates, which is beneficial to the currency. The policy of reducing inflation will lead to the "tequila effect", which is a common phenomenon in Latin American countries.