…after achieving an all time low figure in 2016

The price of goods and services in February this year increased by 5.64 percent compared to February last year, showing an increasing trend since October last year.

Having achieved an all time low figure of 3.22 percent average inflation last year year saw 3.22 percent. The monthly inflation figures began to gradually increase from 4.60 percent in December.

The 5.64 percent year-on-year inflation last month (February last year- Febraury this year) is attributed to the prices of food that went up by 7.82 percent and non-food items 4.22 percent.

The prices of local goods and services have also increased by 7.07 percent and the prices of imported items increased by 4.34 percent.

The increase in inflation, however will not directly translate into absolute increase in price of goods and services as it entails the rhythm or rate at which prices increase. Simultaneously, the purchasing power of ngultrum also decreases.

The purchasing power, as measured by CPI was Nu 77 as of February 2017. This means, Nu 100 in February 2017 is worth only Nu 77 at December 2012 prices. The purchasing power has decreased by 5.34 percent in the past 12 months (i.e. from February 2016 to February 2017) due to price rise in the economy.

From 8.8 percent in 2011, inflation hit an all-time high of 11 percent in 2012. After a persistent figure of about 8 percent for the two successive years, it came down to 4.58 percent in 2015 on the back of a fall in global fuel prices.

NSB officials said that food commodities, transport, including fuel prices and housing and electricity are attached more weights for the sake of calculating inflation.

The National Statistics Bureau (NSB) has classified about 151 items (436 varieties) in its CPI basket and follows their prices for the calculation of CPI.

Each commodity is attached with weights reflecting the relative importance or contribution to the total consumption expenditure of all the households. It is determined using the spending patterns of households. The more current the weights, the more reflective they are of current consumer spending patterns.

For instance, the price inelastic goods, like fuel are attached more weights because despite the change in price of such goods and services, the demand and the supply is unlikely to be affected.

Tshering Dorji