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CPI Definition

An index number measures relative changes over time. There are two main types of indexes: cost of living indexes and market basket indexes. [1] Cost of living indexes calculate price and quantity changes for typical consumer goods, like the Fisher index. [2] Market basket indexes combine individual item indexes using weights based on spending. [3] Calculations show Egypt's inflation rate from 2022 to 2023 was 38.5% based on food prices, while the Central Bank of Egypt reported a market basket inflation rate of 30.2% for the same period.

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18 views4 pages

CPI Definition

An index number measures relative changes over time. There are two main types of indexes: cost of living indexes and market basket indexes. [1] Cost of living indexes calculate price and quantity changes for typical consumer goods, like the Fisher index. [2] Market basket indexes combine individual item indexes using weights based on spending. [3] Calculations show Egypt's inflation rate from 2022 to 2023 was 38.5% based on food prices, while the Central Bank of Egypt reported a market basket inflation rate of 30.2% for the same period.

Uploaded by

Moataz abd el fattah
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Index Number

Definition:

An index number in statistics is a tool that we generally use to measure the difference in relative
changes from time to time.

Types: Value Index, Quantity Index, Price Index

Simple Aggregative Method:

P01 = ΣP1 ÷ ΣP0 x 100


Weighted Index Number

Value of Basket ∈Current Year


Annual CPI= *100
Value of Basket ∈Prior YearValue
There are to major indexes cost of living index & market basket index,

Cost of living index is an index calculated through prices and quantities like fisher index number.

Market basket index: is combination to produce the overall index with weights reflecting their shares in
the total of the consumer expenditures covered by the index

I=∑ w I 0: t

The following calculation based on:

https://www.statista.com

In the flowing approach we will use food prices as reference for CPI and the calculate inflation so for
April 2021-2022 (quantities are based on home consumption in Egypt)

Item quantity 2021 2022 p0q1 p1q1


Meat 1 133.87 164 133.87 164
rice 2 16.79 16.87 33.58 33.74
chicken 2 33.21 42.45 66.42 84.9
Potatoe
s 3 4.33 7.08 12.99 21.24
sum 246.86 303.88
1.23098
P01 1

For April 2022-2023

Item quantity 2022 2023 p0q1 p1q1


Meat 1 164 268 164 268
Rice 2 16.87 31.74 33.74 63.48
Chicken 2 42.45 80.48 84.9 160.96
Potatoe
s 3 7.08 8.55 21.24 25.65
Sum 303.88 518.09
1.70491641
P01 4
38.5006140
Inflation 8

New CPI −Prior CPI


Inflation Rate= ∗100
Prior CPI

Inflation = (1.704916414- 1.230981)*100/ 1.230981=38.50061408


The flowing calculation of market basket based on CBE data

https://www.cbe.org.eg/-/media/project/cbe/listing/publication/2023/april/in_apr_2023_en.pdf

Item Weights CPI(2022) CPI(2023) Inflation rate W* inflation


Food and beverages 32.73 130 201.18 54.75384615 17.92093385
Tobacco and related products 4.41 119.77 143.66 19.94656425 0.879643483
Clothing and footwear 4.38 114.85 138.06 20.20896822 0.885152808
Housing, water, electricity, gas, and other fuels 19.46 115.72 124.96 7.984790875 1.553840304
Furnishings, household equipment, and routine maintenance 3.93 115.28 158.42 37.42192922 1.470681818
Medical care 8.59 121.64 142.02 16.75435712 1.439199277
Transportation 6.66 130.1 154.98 19.12375096 1.273641814
Communications 2.75 105.28 106.6 1.253799392 0.034479483
Recreation and Culture 2.24 152.86 188.29 23.17807144 0.5191888
Education 5.49 170.21 189.46 11.30955878 0.620894777
Hotels, cafes, and restaurants 4.98 133.28 195.61 46.76620648 2.328957083
Miscellaneous goods and services 4.37 122.17 156.54 28.13292952 1.22940902
Total Inflation 30.15602251

Comparing both Inflation there are slight deference due to using weights.

CBE inflation less than theoretical calculation by 8 percent

If you by asset in April 2022 your profit should exceed inflation rate (38%) to gain real profit
Comparing the inflation rate to USD as a reference

Item 2021 2022 2023 2022/2021 2023/2021


1.17082533 1.67213114
USD 15.63 18.3 30.6 6 8
42.8164471
change 9

USD change around 42%

Comparing with wage change

2022/202 2023/202
Item 2021 2022 2023 1 1
wage 2000 2400 2700 1.2 1.125
change -6.25

Wage increment decreased by 6%

And however it should be increased by 42 % just to keep the same standard.

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