Consumer Price Index

The consumer index (CPI) is the measure that summarizes the changes in the level of prices. It is
a useful tool in indicating price changes and measuring inflation.

Using the consumer price index, inflation can be computed as:

Inflation Rate = CP1 Year2 – CP1 Year 1 100

CP1 Year 1

Look at Table 10.10 as an example. It shows a hypothetical consumer price index from 2000 to 2006.

Say, we want to compute for the inflation rate of 2005.

Table 10.10
Year CPI
2000 5.2
2001 6.3
2002 6.5
2003 7
2004 8.2
2005 9
2006 9.6

Using a formula provided, we will come up with

Inflation Rate = CP1 Y2 – CP1 Y1 x

100
CP1 Y 1

= CP1 2005 – CP1 2004 X

100
CP1 2004

= 9.0 - 8.2 X
100
8.2

=9.76
 The inflation rate from the example above simply means that anything we bought in 2005 has
increased its average price by 9.76% from 2004.
Table 10.11 shows actual inflation rates of the Philippines from 1995 to 2010 based on the
National Statistics Office (NSO). The highest rate so far was in August 2008 at 12.4% inflation; the lowest
was in August 2009, with an average inflation rate of 0.1%.

Table10.11 Year-on Year Inflation Rates in the Philippines. All items January 2005-September 2010)

Year
Month
2005 2006 2007 2008 2009 2010
January 8.4 6.7 3.9 4.9 7.1 4.3
February 8.5 7.6 2.6 5.4 7.3 4.2
March 8.5 7.6 2.2 6.4 6.4 4.4
April 8.5 7.1 2.3 8.3 4.8 4.4
May 8.5 6.9 2.4 9.5 3.3 4.3
June 7.6 6.7 2.3 11.4 1.5 3.9
July 7.1 6.4 2.6 12.3 0.2 3.9
August 7.2 6.3 2.4 12.4 0.1 4
September 7 5.7 2.7 11.8 0.6 3.5
October 7 5.4 2.7 11.2 1.6
November 7.1 4.6 3.2 9.9 2.8
December 6.7 4.3 3.9 8 4.3
Average 7.6 6.2 2.8 9.3 3.2