Record low inflation in August

The price of goods and services as of August this year has increased by 2 percent compared with the prices of August last year, according to the consumer price index of the National Statistical Bureau (NSB)

This is the lowest year-on-year inflation witnessed until August this year, taking the eight-month average inflation to 2.57 percent.

The consumer price index or year-on-year inflation in July 2018 (the period between July 2017 to July 2018) was recorded at 2.01 percent.

The Consumer Price Index (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.

Compared to August last year, food prices increased by 3.49 percent and prices of non-food commodities increased by 1.02 percent, this August.

Likewise prices of local goods and services increased by 1.41 percent and prices of imported goods and services went up by 2.55 percent.

Among the food group price of fish has increased by 9 percent followed by narcotics (6.7 percent) and beer (4.6 percent). This is the price increase between August 2017 and August this year. Since sale of tobacco is banned, narcotics constitute areca nut for the sake of determining inflation.

In the same period, among the non-food group, catering services saw an inflation of 7.8 percent followed by the increase in price of footwear by 4.7 percent.

According to the NSB, CPI can be used as an economic indicator to determine the effectiveness of an economic policy.

The NSB keeps track of the prices of 151 commodities and 436 varieties to determine inflation. This is called the market basket, which is representative of all goods and services purchased by the households.

Some 557 retail shops, vendors, hotels and service providers are chosen as sample outlet from where prices are collected on monthly basis.

However, each commodity is attached with weights that reflect the relative importance or contribution to the total consumption expenditures of all households.

For instance, rice and fuel are basic items that every household consumes. Irrespective of the price fluctuation, the demand for these commodities would not be affected. Such goods are attached with more weights.

Tshering Dorji

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