Inflation

Measurement of inflation

The principal measure of inflation is usually taken to be the consumer price index, which is an index of the price of a typical "basket" of goods, collected mainly by surveys of prices charged at retail outlets, and (usually) corrected for quality changes. The term "cost of living index" has often been applied to consumer price indexes, but has sometimes been more broadly interpreted to include the effects upon household welfare of such matters as changes in social security payments. Price indexes of investment goods, imports and exports are also compiled and an average of those indexes, weighted according to the proportions of those items in national income, is used as a "gdp deflator" - providing the most comprehensive of the inflation measures. There are also indexes of commodity prices and producer prices.