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The country experienced an average inflation of 2.80 percent until May this year.

Having experienced an annual inflation of almost five percent in 2017, the price of goods and services between January last year and January this year (year-on-year inflation) saw a sluggish increase of 2.98 percent.

The year-on-year inflation of February stood at 2.61 percent.

The Consumer Price Index (CPI) in May 2018 [from May 2017 to May 2018] increased 2.62 percent, which was 0.07 percentage point higher than the previous month. Both food and non-food items recorded a slightly higher increase compared to April (5.52 percent and 0.74% respectively).

CPI is a measure of changes in the average retail prices of a market basket of goods and services purchased by households for day-to-day living. It shows how much, on average, prices of goods and services have increased or decreased from a particular reference period.

The National Statistics Bureau (NSB) has classified selected goods and services from the market basket into 12 major groups.

In the month of May, prices of alcoholic and narcotics increased by 5.6 percent compared with the same month last year. Price of food and non-alcoholic beverages also experienced a price rise of 5.5 percent. In the transport and communication group, the NSB recorded a negative price growth of 2 percent and 0.01 percent.

Among the food group, price of fruits in May increased by 12.4 percent compared with May last year. Price of narcotics also increased by 11 percent. Since tobacco is a contraband substance, the NSB refers to areca nut in the narcotics group.

Similarly, prices of bread and cereals, meat and fish also witnessed a price rise of 6 percent, 5.7 percent and 6.2 percent respectively.

Among the non-food group, furniture and furnishing, carpets and other floor coverings saw the highest year-on-year inflation of 4 percent in the month of May.

Because inflation erodes the purchasing power of currency, the NSB found that Nu 100 in May 2018 is worth only Ngultrum 75 at December 2012 prices. The purchasing power of ngultrum has decreased by 2.56 percent in the past 12 months (from May 2017 to May 2018) due to price increase in the economy.

To measure inflation, NSB has a sample of goods and services which is representative of all goods and services purchased by the households. The present market basket has 151 items, consisting of 436 varieties.

Each commodity is given weights that reflect the relative importance or contribution to the total consumption expenditures of all households. The more current the weights, the more reflective they are of current consumer spending patterns.

Tshering Dorji

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