1 of 25

1

Consumer Price Index & Inflation

Prices and Wages Division

Department of Census and Statistics

Ministry of Finance

2 of 25

2

Outline

What is a Consumer Price Index (CPI)?
Purpose of a Consumer Price Index
Current Consumer Price Indices of Sri Lanka
Geographical Coverage of CPI
Source of weights for the CPI
Consumer Price Index; Special Features
Price collection for the CPI
Computation of Indices
Index Calculation Methodology
Inflation (What is Inflation?, Types of Inflation, Measurement of Inflation)

3 of 25

3

What is a Consumer Price Index (CPI)?�

A Consumer Price Index measures changes in the price level of a market basket of consumer goods and services purchased by households in a particular period of time.

4 of 25

4

Purpose of a Consumer Price Index

�

It is an indicator to measure the changes in the general level of consumer prices and used as one of the key indicators of inflation.
Consumer Price Index is also used for socio-economic analysis and policy purposes, mainly in the determination of monetary and income policies.
Use for formulation of policy for the determination and evaluation of wages and other monetary incomes.
Consumer price index is also used to deflate the current values in National Accounts to obtain real values and therefore, a major determinant of the GDP deflator.

5 of 25

5

Current Consumer Price Indices of Sri Lanka

�

National Consumer Price Index (NCPI) (Base 2013=100)

is released monthly with time lag of 21 days

Colombo Consumer Price Index (CCPI) (Base 2013=100)

is released last working day of each month

6 of 25

Geographical Coverage of NCPI

6

7 of 25

Derivation of weights for the NCPI

Based on monthly average household expenditure.

The monthly average household expenditure is derived from the Household Income and Expenditure Survey (HIES) 2012/13.

Since the survey covered 20,540 all island HHs during 1 year in 12 rounds (from July 2012 to June 2013) and, it has captured the relevant consumption pattern including seasonal variations.

Province	Households responded
Western	5,358
Central	2,378
Southern	3,182
Northern	1,803
Eastern	1,939
North-western	1,811
North-central	1,269
Uva	1,307
Sabaragamuwa	1,493

8 of 25

8

Consumer Price Index; Special Features

Comparison of key characteristics between National Consumer Price Index (Base 2013 = 100) and the Colombo Consumer Price Index (Base 2013=100)

9 of 25

9

01-12 - Individual consumption expenditure of households
01 - Food and non-alcoholic beverages
02 - Alcoholic beverages, tobacco and narcotics
03 - Clothing and footwear
04 - Housing, water, electricity, gas and other fuels
05 - Furnishings, household equipment and routine household maintenance
06 - Health
07 - Transport
08 - Communication
09 - Recreation and culture
10 - Education
11 - Restaurants and hotels
12 - Miscellaneous goods and services

COICOP

(Classification of Individual Consumption According to Purpose)

10 of 25

Price collection for the NCPI

Price data is collected only from the

selected outlets
for a given detailed specifications
during a selected period

10

11 of 25

Price collection for the CPI (Selection of outlets)�

Department uses purposive sampling method in order to choose the sampling units.

Thus, the outlets which have more consumers and at the same time, the outlets available with good quality goods are considered as the sampling units.

Three price quotations are collected for each of the item

11

12 of 25

Price collection for the CPI (Specifications)

Item : Samba No. 1

Specification:

Price for : 1 Kilogram

Packaging : Loose

Type : Medium grain, Not Polished, Well steamed, Removed stones and sand from rice

Color of Variety : White

Share of broken rice : Very low

Brand : Brand less

Origin :Local

Item : Nadu

Specification:

Price for : 1 Kilogram

Packaging : Loose

Type : Medium grain, Parboiled, Removed stones and sand from rice

Color of Variety : White /Red

Share of broken rice : Very low

Brand : Brand less

Origin : Local

Item: Potatoes

Specification:

Price for :1 Kilogram

Packaging : Loose

Type : Fresh Potatoes

Quality :Good quality, intact (unbroken, unmarked) skin

Origin :Local/Imported

12

13 of 25

Specifications

13

14 of 25

Specifications

14

15 of 25

Specifications

15

16 of 25

Price collection for the NCPI (Time Schedule)

16

	April				May				June
	1st week	2nd week	3rd week	4th week	1st week	2nd week	3rd week	4th week	1st week	2nd week	3rd week	4th week
Group I - A
Date of Pricing	02	09	18	23	07	14	21	28	04	11	18	25
Date of Returning	03	10	22	24	08	15	22	29	06	12	19	26
Group I
Date of Pricing	02	-	18	-	07	-	21	-	04	-	18	-
Date of Returning	03	-	22	-	08	-	22	-	06	-	19	-
Group II
Date of Pricing	-	09	-	-	-	14	-	-	-	11	-	-
Date of Returning	-	10	-	-	-	15	-	-	-	12	-	-
Group III
Date of Pricing	-	-	-	23-24	-	-	-	-	-	-	-	-
Date of Returning	-	-	-	25	-	-	-	-	-	-	-	-

Once a week

Eg: Fresh Fish, Vegetables, Fruits, Coconuts, Rice, etc. (Items-134)

Once in two weeks

Eg: Leafy vegetables, Dried fish, Spices etc. (Items-135)

Monthly

Eg: Textile, Footwear, Non-durable household goods etc. (Items-137)

Quarterly

Eg: Consumer durables(furniture), Building materials, Pharmaceutical items etc. (Items-137)

Three price quotations are collected for each of the item in the district town.

17 of 25

Computation of Indices �

Two-stage or Modified Laspeyres formula (short-term price relative formulation)

will be used to calculate the index.

17

₌_{Index for the current month}

_{= Is the price for i}^th_{item in current period t}

_{= Is the price for i}^th_{item in previous period t-1}

_{= Previous periods’ updated weight}

The Geometric Average of price quotations is used in the computation of the index

18 of 25

18

Aggregation across regions

The National CPI for Sri Lanka will be based on nine

provinces.

Each province is weighted according to the total

expenditure within the province in proportion to total

expenditure in the reference population to produce the

National CPI.

National Index Calculation Methodology

19 of 25

19

For the month of Apr. 2022

NCPI :190.3

The general price level has increased by 90.3percent

compared to the base year (2013)

The CPI is one of the most commonly used statistics for identifying periods of inflation or deflation.

20 of 25

20

What is Inflation?

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services.

On the contrary a drop in CPI in the short term can be interpreted as a period of deflation where the buying power of the consumers increases.

21 of 25

21

Types of Inflation compiled by the DCS

Headline Inflation

Headline inflation is the raw inflation figure reported through

the Consumer Price Index (CPI)

Core Inflation

The core inflation, which reflects the underlying inflation by

excluding volatile items of food, energy and transport.

22 of 25

22

The measurement of Inflation

Year on Year (Point to Point)

The percentage change in the CPI during the last 12 months.

(The percentage change in the current month CPI over same month

CPI of last year)

Eg.

Inflation, April 2022 = NCPI April 2022-NCPI April 2021 *100

NCPI April 2021

= 190.3-142.2 *100

142.2

= 33.8%

23 of 25

23

24 of 25

24

National Consumer Price Index (NCPI)-(BASE 2013=100)
April, 2022 NCPI web release April 2022.pdf 23-05-2022

NCPIInfographic

25 of 25

25

Thank you