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Going by the National Statistical Bureau (NSB) report, price of goods and services increased by 3.71 percent between November last year and November this year.

This is the lowest monthly consumer price index (CPI) or year-on-year inflation last year.

CPI for December is yet to be published. Year-on-year inflation measures the price change in a particular month of the year as compared to the same month of the previous year.

The drop in inflation rate, however, does not translate into absolute fall in prices of goods and services. It indicates the rate at which prices increase, and thus, lower inflation rate entails subdued pace of price rise. This is also called disinflation.

From January until August this year, inflation hovered around five percent. It gradually dropped to 4.9 percent in September and to 4.8 percent in October. Further drop in November (3.7 percent) could be attributed to the drop in fuel price that came into effect since November 11.

According to CPI, inflation on fuel witnessed downward trend of negative 4.6 percent. This means between November last year and November this year, fuel as a standalone commodity saw a deflation of 4.6 percent.

Similarly, purchase of vehicle also experienced a deflation of 1.25 percent.

Overall, price of food and non-food items increased by 6.36 percent and 1.98 percent respectively. Price of local goods and services increased by 3.79 percent and that of imported goods and services by 3.63 percent.

NSB attaches weights to various goods and services identified in the market basket, which is representative of all goods and services purchased by the households. The present market basket has 151 items (436 varieties) compared to 80 items (363 varieties) in the previous CPI basket.

Weights, according to the CPI, reflect the relative importance or contribution to the total consumption expenditures of all households. It is determined using the spending patterns of households.

The NSB attaches almost 52 percent of the total weights to the imported items and the rest for domestically produced goods and services.  Among the food groups, bread and cereals, and rice were given the highest weight.

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.

Nu 100 in November 2017 is worth only Nu 75 at December 2012 prices. The purchasing power has decreased by 3.57 percent in the past 12 months (November 2016 to November 2017) due to price rise in the economy.

Tshering Dorji

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