The Consumer Price Index, better known as the CPI, is the variation in the prices of certain products and services market of a country over a period of time.

When the CPI is positive then it appears that inflation is the increase in prices due to excess currency issued. This process leads to a depreciation of the currency of a nation.

However, if the CPI is negative leads to deflation is a decline in prices due to lack of demand. Because of this there is an increase of the monetary unit.

Influence

The products that affect the CPI and therefore those who consume families, are stipulated by the National Institute of Statistics (INE), which is responsible for conducting surveys for their studies.

The results of these surveys leads to the so-called basket representative of household consumption. The categories of these products and their weights are currently:

How is calculated

The first thing that makes the INE to calculate the CPI is collecting prices for a number of establishments throughout Spain. These must be the most frequented and more sales.

The collection of information is 1 to 22 every month and visits to establishments are done the same day, which allows users to change monthly prices.

There exceptions in the collection of information such as electronic products that are visited each quarter or products with expiration are reviewed three times a month.

Prices are to be contrasted retail. Tenders and liquidations are ignored unless they occur in all establishments in the locality and have a duration of at least 2 months.

In what concerns

The CPI is also used to hear the loss of purchasing power suffered by traders due to the rise in prices. The areas affected by the CPI are:

·  Negotiating wages and pensions: the government updates the minimum wage, the salaries of civil servants and pensions forecast growth of inflation.

The increases agreed in collective bargaining, are updated at the rate of inflation based on the CPI.

·  Rental properties: the Urban Tenancy Act provides that in the first 5 years of the contract alone will top the rent according to the CPI for the previous year.

·  Statement of Income: one statement in which inflation has not risen is compensated by the Ministry of Finance. Deductions and increase economic quantities because they need more money to buy the same thing.

·  Finance: Upload inflation rising interest rates. This reduces the application of credits and more money is pumped to a fixed term, so that the stock exchange floor. If inflation decreases the reverse is true.

Inflation interannual

It is the increase in the goods and services that are produced from a date until it has passed one year. For example, from February 2007 until febero 2008.

Inflation increases in the prices of goods in the shopping basket. This action is measured through the consumer price index (CPI).

Evolution

El The CPI in Spain has suffered a year increase of 2.2%. Regarding the rise intermensual present, only the months of January and July have produced a decline in the CPI. This is mainly due to periods of discounts.

In terms of category, which has increased over the past year has been to alcohol and snuff at 6.1%. For their part, medicine is the one that has suffered a fall in the CPI increased with a -2.2%.

Remarks

From January 2003 to December 2001 has been in force the CPI basis 1992. Subsequently, in January 2002 was introduced by CPI calculation basis 2001.

The underlying inflation is the CPI excluding the prices of energy products and fresh food is not processed.