Frequently asked questions

What is the CPI?
It is a global economic indicator whose purpose is to measure, over time, the variation of the prices of a basket of goods and services representative of household consumption in the country.

The CPI has consolidated as one of the main indicators of the country's economic performance; its applications are numerous and of great importance in the economic, legal and social scopes. The estimation of its evolution over time, allows for a measure of general inflation in the country, which is reliable and timely thanks to the application of a methodology based on the recommendations of good international practices and the systematization and continuous improvement of the processes facilitated by the ISO 9001: 2015 Quality Management System and the institutional quality policy.
What is the CPI for?
In addition to its use as a measure of inflation, it should be noted its use as:

* Update factor for tax credits.
* Determinant of the value of the Investment Unit (UDI).
* Factor to update the Unit of Measurement and Update (UMA).
* Referent in contractual negotiations.
* Update factor of nominal values ​​and as a deflator of the System of National Accounts of Mexico.
* Assistant in the determination of salary increases, the amounts of pensions and social security benefits.
* Assistant in the calculation of interest payments, rent amounts, private contracts and prices of bonds that are usually indexed to the CPI.
* Assistant to the financial and treasury authorities of the country in the design and evaluation of monetary and fiscal policies, aimed at ensuring the stability of the purchasing power of the national currency and healthy public finances.
* Statistical tool for enterprises and researchers.
What is the difference between the Consumer Price Index and the Producer Price Index?
CPI PPI
It is an indicator of the behavior of the prices of goods and services consumed by families. It is an estimator of the evolution of the prices of goods and services that form the production of the economy. In addition to family consumption, it also includes intermediate goods and services, government consumption, investment and exports.
The weighted averages are based on the expenditure estimates of Mexican families that INEGI obtains through the National Survey of Household Expenditure (ENGASTO) - National Survey of Household Income and Expenditure (ENIGH) The weightings are estimated based on the System of National Accounts of Mexico (SCNM), the Economic Censuses and the Statistical Yearbooks
It includes imports as a part of the goods consumed by families. It only includes national production so it does not consider imports.
Prices are collected at the places of purchase where families acquire the goods and services they consume. Prices are collected directly from producing enterprises of goods or service providers.
It is elaborated based on the final price, which includes taxes on consumption, transport costs and marketing margins. Prices quoted are mainly Free on Board (FOB) production plant. Therefore, they do not include taxes on consumption, transport costs and marketing margins; they are requested voluntarily and are confidential.
Biweekly periodicity. The results are published on the 10th and 25th of each month in the Official Journal of the Federation, in a press release (issued the day before it is published in the Official Journal) and on the website of the INEGI. Monthly periodicity. It is published no later than the 9th of each month in a press release and on the website of the INEGI.
How do you read or interpret an index?
An index is a statistical measure that simplifies the measurement of movements in a numerical series based on a period in time. For example, the CPI is based on the second half of July 2018; that is, the average level of the index (which represents the average price level) is established during the second half of July 2018 equal to 100. Changes in the index are measured in relation to that figure. An index of 110, for example, means that there has been an increase of 10 percent in the average prices of goods and services of the CPI, since the second half of July 2018. The movements of the index from one date to another can be expressed as changes in the index points (simply, the difference between the index levels), but it is more useful to express the movements as percentage changes.

What is inflation?
Inflation is the generalized and sustained increase in the prices of goods and services in a country. To measure the growth of inflation, indexes that reflect the percentage growth of a weighted basket of goods and services are used. The index for measuring inflation is the CPI (Consumer Price Index). This index measures the percentage increase in the prices of a basket of goods and services acquired by a typical consumer in the country.

Why is it difficult to measure inflation?
Measuring inflation is a complex technical challenge for the following reasons:

a. Because of the large number of prices that exist in an economy.
b. Because of the cost of having the broadest possible coverage of the expenses incurred by economic agents.
c. Because prices do not change simultaneously or advance all the time at the same speed.


Because it is not possible to quote all the prices of the goods and services that are consumed, the construction of the CPI and its calculations are based on the sampling procedures and international standards.

How does inflation affect an economy?
One of the main reasons why inflation is measured as accurately as possible is because it is a harmful economic phenomenon. Inflation is harmful for the following reasons:

a. damages the stability of the purchasing power of the national currency;
b. affects economic growth by making investment projects riskier;
c. distorts consumption and savings decisions;
d. promotes an unequal distribution of income;
e. makes difficult financial intermediation


How inflation could be known between two dates?
To determine the inflation between two dates, the value of the price index of the last date is considered and divided by the value of the first. For example, to know the annual inflation of the second half of March 2018, it is divided the index of this second half between that corresponding to the second half of March 2017. The result obtained is subtracted from the unit and multiplied by 100, this way the annual CPI inflation is obtained:

      CPI of the second half of October 2017: 96,791
      CPI of the second half of October 2016: 90,932
      Variation in % = (96.791 / 90.932 - 1) *100 = 6.44

On the website of the INEGI, there is a very useful tool called "Inflation Calculator" ". When accessing this utility the system requests the necessary data to calculate the inflation in the period that the user has established

https://www.inegi.org.mx/app/indicesdeprecios/CalculadoraInflacion.aspx
Why is it that the CPI does not reflect the inflation that people perceive as "impact in their wallets"?
Because the Index is a global indicator that measures the average variation of the prices of the 299 products in the basket, measured in a weighted manner with the average expenditure of Mexican households, so it does not coincide with the expenditure and price variations that deal with the products consumed by a specific household.
Is the Consumer Price Index (CPI) a cost of living index?
The CPI is not the same as the cost of living index because it measures the goods and services consumed by households, while the cost of living index measures the changes in the amount of expenses in which households must incur to maintain their standard of living.

What do Core and Non-core inflation mean?
The Core component is integrated by the goods and services for which the variation of their prices responds mainly to market conditions, in addition; core inflation is the increase in the prices of the CPI subset, which contains the elementary aggregates with the least volatile quotes or with a more stable evolution. Likewise, it measures the medium-term inflation propensity and its result is very valuable and useful for analyzing the trend of medium-term prices and as a reference for the implementation of monetary and fiscal policies.

The Non-core component is integrated by goods (unprocessed foods, energy sources and tariffs authorized by the government) and services whose prices do not respond directly to market conditions, but are highly influenced by external conditions such as weather or regulations by the government.
What is the regularity of calculation of the CPI and where can the results be consulted?
The CPI has a biweekly calculation and biweekly and monthly dissemination periodicity. The monthly result is the average of the two halves of the same month. For the dissemination of said results, the INEGI publishes in the Official Journal of the Federation, at the latest on the 10th of each month, the CPI level corresponding to the month and the second half of the previous month; and no later than the 25th, the index corresponding to the first half of the same month. The day prior to publication in the Official Journal of the Federation, INEGI makes available to users information on this indicator on its website: https://www.inegi.org.mx/default.html There is also the following free consultation telephone number: 01 800 111 4634.
How is the Consumer Price Index constructed?
The CPI began with its publication since 1969, reflecting the extensive experience in Mexico in the construction of the different price indexes, INEGI, which since July 2011 is responsible for calculating the CPI, applies a cutting-edge calculation methodology, consistent with international best practices.

In the case of the current CPI, those elements that guarantee the achievement of the objectives set out in its definition were considered:

a. The use of an international standard calculation formula. The Consumer Price Index is calculated using the Laspeyres formula, which has the characteristic that the basket and the weightings are fixed, during the period in which the base is current. The Laspeyres formula is widely used around the world, including developed countries, and is recommended by international organizations to facilitate the comparison of price indexes among countries.
b. That all the urban localities of the country are represented. In the CPI, the urban population of the country is represented by cities, distributed throughout the national territory, which make up the index, grouped into geographical regions, and classified in locality sizes. Likewise, the requirement was considered that each state of the Mexican Republic be represented by at least one city.
c. That the goods and services acquired by urban and rural consumers are considered. Expenditure on the goods and services that Mexican families carry out is represented by a basket made up of 299 generic concepts of weighted averages of goods and services. The determination of the basket and its weighted averages was made based on the National Survey of Household Expenditures (ENGASTO 2012 and 2013), conducted by the National Institute of Statistics and Geography (INEGI). The weighting of each of the elementary aggregates of the CPI basket represents the relative importance of their expenditure in relation to the total expenditure of Mexican households.
d. That the different points of sale of the different goods and services are included. The points of sale in which consumers make their purchases were selected in each of the CPI localities based on a probabilistic sampling and according to the preferences of the households. In this way, to capture the prices used in the indicator, include supermarkets, public markets, street markets, dime store, price clubs, department stores, etc.
e. That different brands, presentations and varieties of the goods and services that Mexican households consume be considered. The specific goods and services that make up the CPI are selected at the points of sale, taking into consideration the preferences of consumers in terms of brands, presentations and varieties.


What is the geographical and population coverage of the CPI?
The geographical coverage of the CPI is national at the level of urban and rural populations in the country. For the price quotation, the CPI compilation sample is composed of 55 geographical areas distributed in the 32 states of the country, all with a higher population to 20, 000 inhabitants, and including the ten conurbations of zones of greater population, according to the Intercensal Survey of 2015. In this way, it is in compliance with the provisions of Article 20 of the Fiscal Code of the Federation.

The geographical areas of the sample are grouped into 7 regions (Northern boarder, Northwest, Northeast, North, South, South, and Metropolitan Areas of the CDMX), as well; the geographical areas are classified by their size into: small (from 20,000 to 190,000 inhabitants), medium (more than 190,000 and up to 930,000 inhabitants) and large (more than 930,000 inhabitants).

On the other hand, the weighting structure of the current CPI elementary aggregates was obtained from the expenses reported in the National Survey of Household Expenditures (ENGASTO) 2012 and 2013 and in the National Household Income and Expenditure Survey (ENIGH) 2014.

Information is collected to calculate the CPI in at least one city per state. In this way, the spatial representativeness of the CPI is ensured. To know the complete list of the 55 geographical areas, you can consult the Methodological Document of the CPI on the Institute's website:

https://www.inegi.org.mx/programas/inpc/2018/

Do the products of the CPI basket vary by region?
The CPI basket is national, therefore, it is the same basket for all regions and cities. What varies in some cases is the availability of some products, for example: electric transport is only quoted in Mexico City, Guadalajara and Monterrey. The determination of the sample of specific products within each geographical area is what allows the Index to be determined based on the regional distribution of prices.

What is the CPI basket?
The CPI is prepared by tracking the prices of a basket of goods and services representative of the consumption of Mexican urban and rural households. In the determination of the consumption basket, the National Household Expenditure Survey (ENGASTO), which INEGI collects, is used as the main source of information. The information on the consumption expenses of Mexican households generated by this survey is incorporated as weighted averages of the price variations in the CPI calculation. For the Base Year Change, the ENGASTO made in 2012 and 2013 are being considered, using 770 and 776 expenditure concepts, respectively. Based on this information, a basket of 299 groups of goods and services called elementary aggregates was built for the CPI, with a base period corresponding to the second half of July 2018. The CPI basket can be consulted in the Methodological Document of the CPI, on the Institute's website https://www.inegi.org.mx/programas/inpc/2018/. In addition to the above, a representative sample of specific products or services corresponding to each elementary aggregate was selected and the prices of which are monitored in the establishments where consumers mainly buy. The CPI after the Base Year Change begins with a sample of around 120,454 specific goods and services.
What is the Basic Basket?
The basic basket is a subset of the basket of goods and services of the Consumer Price Index. Unlike the CPI basket, which covers 299 elementary aggregates, the goods and services that make up the basic basket were selected by the representatives of the signatory sectors of the Pact for Stability and Economic Growth (PACTO) at the end of 1988. The objective of knowing the behavior of the prices of the goods and services that made up the basic basket was to guarantee compliance with the agreements on the prices of goods and services of the public and private sectors, established by the participants of the PACT. The basic basket considers 84 CPI elementary aggregates.
How is it guaranteed that the prices that recurrently feed the CPI are representative measures?
To guarantee the representativeness of the prices involved in the calculation of the CPI, a probabilistic sample of around 24,000 information sources is selected, distributed among the 55 geographical contribution areas. These sources are usually stores, shops and service providers preferred by consumers.

Once the establishments are chosen, an investigation of brands and presentations is carried out to select the specific products whose price is followed up recurrently.

What are the elementary aggregates and specific concepts of the CPI basket?
For the preparation of the CPI, the prices of goods and services described in detail with their brand, variety, presentation, capacity, etc. are continuously monitored. These specific items are grouped together to form homogeneous groups of goods and services that are called elementary aggregates.The latter constitute the smallest unit of weighting within the CPI and, therefore, correspond to the elementary indexes for the calculation of the National Index.The CPI basket is made up of 299 elementary aggregates and 120,454 specifications of which one part ( for example, food and beverages) is quoted four times a month (weekly contributions), others (furniture, clothing, etc.) twice (biweekly). The rental income is quoted once a semester.

For example:

a. Elementary aggregates of packaged soft drinks: It is integrated by specific soft drinks, isotonic, energy drinks and packaged tea. An example of specific is the following:

COCA COLA, SOFT DRINK, OF COLA, 600 ML

b. Elementary aggregates of Funeral services: It is integrated by different services and products (specific) that are offered in the different funeral homes. An example of specific is the following:

SM, INHUMATION, WOOD COFFIN, WAKE, HEARSE.
How is the relative importance (weighted averages) of elementary aggregates calculated within the CPI basket?
The weighting of an elementary aggregate represents the percentage share of the expenditure carried out in the elementary aggregates regarding the total cost of the basket. For the update of the expenditure weightings of the CPI basket, the information of the expenditure made by households in 770 expenditure concepts of the ENGASTO 2012 and 776 concepts of the 2013 was obtained (you can consult the Methodological Document for more information). For some elementary aggregates, the information was reviewed and validated with complementary sources such as the National Household Income and Expenditure Survey 2014, the System of National Accounts of Mexico, the Economic Censuses, the National Survey of Addictions, Statistics of production and commerce, external surveys, administrative records, among others.

The calculation of the weightings is defined as:
ωlk = (
Glk → / GT
) * 100 ; l = 1, 2, …, 55 ; k = 1, 2, …, 299
Where:

ωlk = Weighted average corresponding to the k-th elementary aggregate in the l-th geographical area estimated from the ENGASTO 2012 and 2013.
Glk = Expenditure of the elementary aggregate k-th in the l-th geographical area estimated from the ENGASTO 2012 and 2013.
GT = Total estimated expenditure from the ENGASTO 2012 and 2013.


These ratios indicate the relative importance or weight of each product within the expenses of Mexican families. In turn, each of these percentages has a correspondence with the CPI elementary aggregates. Therefore, the weights (weighted averages) thus estimated determine the impact that will have a change in the price of an elementary aggregate in the family budget.

It is the point of reference in the time from which the comparisons of the change in prices are made. The base period CPI equals 100. For the CPI the period from which the price variations are estimated is the second half of July 2018 = 100, for this change of base year.

What is the base year of a price index?
It is the reference point in time from which comparisons of the change in prices are made. The base period CPI equals 100. For the CPI, the period from which price variations are estimated is the second half of July 2018 = 100, for this base year change.

What is the base year change of the CPI to the year 2018?
The base change of a price index usually involves two procedures:

a. The adoption of a new point in time that is used as a reference to make price comparisons.
b. Modification of the base of the indicator's weighted averages.
c. Update of the basket of goods and services.


The base change of the CPI implies that, as of the second half of July 2018, the level of the Index during said half is 100 and it is the reference with which the prices collected as of the first half of August 2018 are compared. This point in time is known as the base period of comparison.

With regards to the new weighting base, as of the same date, the CPI weighted averages, which express the importance within the total expenditure of Mexican families of each of the goods or services that make up the basket of the indicator, were updated based on the structure of expenses that the ENGASTO 2012 and 2013 showed. This procedure meant that the updating of the basket of goods and services will be with 299 elementary aggregates with their new weighted averages, in order to reflect consumer preferences in the households.

What are the main characteristics of the CPI derived from the base change at July 2018?
The most recent update of the base reference period (Index = 100) corresponds to the second half of July 2018, and has the following characteristics:

a. National geographical coverage.
b. Representation of each state by at least one city.
c. Price quotation in 55 geographical areas, distributed in 7 regions, all with a population of at least 20,000 inhabitants, including metropolitan areas with a larger population.
d. The basket of goods and services considers the total consumption expenditure of urban and rural households, distributed in 299 elementary aggregates, 14 of which are disaggregated into 38 sub-elementary aggregates or weighted varieties.
e. Indexes are developed for four expenditure ranges and three locality sizes.
f. About 328 000 prices are quoted monthly, corresponding to a sample of approximately 120,454 specific goods and services.
g. The 299 elementary aggregates that make up the CPI basket can be classified in 91 branches of economic activity.
h. In the CPI, the prices of the specific items that make up the sample of food elementary aggregates are quoted four times a month, while those of the rest of the elementary aggregates are quoted twice a month, except for housing, which is quoted once a semester.


Why is it important to update the CPI weighting average base?
Based on the analysis of the ENGASTO 2012 and 2013, it was concluded that the improvements made to the collection of household expenses by the survey, help to ensure that the weightings of the basket reflects the current consumption patterns. And so decrease the bias due to the age of the weighed averages. In this way, now the calculated weighted averages correspond to the year 2018, updated to the second half of July 2018, to be aligned with the base or reference period.

The modern theory on the measurement of inflation indicates that as the basket and the weighting base of the price indexes move away from the comparison period or reference point, the estimated inflation may present a bias. Consequently, the updating of the basket and the weighting base of the CPI is a need to guarantee the most accurate measurement of inflation possible.

How often should weighted averages be updated?
In accordance with the international best practices, it is recommended to update the weighted averages once every five years. However, depending on the economic dynamism of a country, the weighted averages could be updated beforehand. In the case of Mexico, the CPI is part of the Economic Update Cycle, so the next update of the weighted averages can be in 2021.
What formula is used to calculate the CPI?
The INEGI, and by mandate of the Federal Tax Code, applies the Laspeyres formula to perform the calculation of its indexes. The price index of Laspeyres calculates the variation of the value of a basket made up of goods and services, under the assumption that the purchase quantities of each item in the basket are the same as those made in the base period.

The Laspeyres Index is defined as a price index that calculates the variation of the value of a basket made up of goods and services, under the assumption that the purchase quantities of each item in the basket are the same as those made in the base period. This is defined as:



What are the classifiers of CPI goods and services?
The CPI, with the new reference period for the second half of July 2018, has 4 classifiers, the main classifier is: Classification of Individual Consumption by Purpose (CCIF) and different presentations, in order to meet the different needs of users. These are:

  • Classification of Individual Consumption by Purpose (CCIF). From this CPI update, the main classification and definition of the basket is the UN Classification of Individual Consumption by Purpose (CCIF), version 1999. This classifier is the link for the international comparability of the Consumer Price Indexes between countries. It is an integral part of the System of National Accounts of Mexico (SCNM) and is used in other statistical scopes such as household expenditure surveys; international comparisons of the Gross Domestic Product (GDP); among others.


    • For the CPI the first 12 divisions, 44 groups and 87 classes are used.

    The 12 divisions of the CCIF used in the CPI are:



  • North American Industry Classification System (NAICS 2018) The economic statistics carried out by the INEGI, as well as those of other state units that generate this type of statistics, have the obligation to present this classification, as stipulated in the Official Journal of the Federation of July 10th, 2009. It is worth mentioning that this classification system was built in conjunction with the United States and Canada (with whom the Free Trade Agreement is signed) due to the need to homogenize economic classifiers, among other things, to facilitate comparability and the exchange of financial and economic information.

    The NAICS classifies the products and services according to the industries that produce them or perform them. These in turn are classified by production functions. In this way, elementary aggregates of the CPI, when classified by Branch of concepts of the NAICS, are kindly able to reflect the industry or the economic sector that produces them. The order of the classifier is "based on the traditional grouping of economic activities into three large groups: primary, secondary and tertiary activities. The primary are related to the direct use of natural resources. The secondary ones are related to the transformation of all types of goods or products. The tertiary refer to trade and services. " (Methodological synthesis of the North American Industry Classification System, Mexico NAICS 2007).

    The 299 CPI elementary aggregates are presented in the 3 economic activities that comprise the 15 sectors of the NAICS, which, in turn, comprise 91 branches of this classifier.


  • This classifier associates the products by their industrial origin. At their most aggregate level, elementary aggregates are classified into eight groups, which are disaggregated into 17 subgroups, 36 sub-subgroups and 76 elementary aggregate sets, until reaching the level of elementary aggregate. The 8 groups that make up this classification are:




  • Classification by Durability of goods The elementary aggregates of the basket are also classified according to their durability, as: Durable, Semi-durable, Non-durable and Services. Where the time factor is important for their determination. A buyer can choose to purchase a large quantity of a particular product with a special price discount, store it in their household and consume it over a relatively long period of time.

    For example, canned foods can be stored for months without deteriorating the quality; this exemplifies a durable good. Milk, for example, is usually consumed within days after the purchase, this is an example of a non-durable good; but a semi-durable good, like a shirt, will be used many times. When it comes to services, they are distinguished by their "intangibility", that is to say, can not be seen, felt, smelled or listened to before acquiring it. For example, the payment for bus use is a concept of services.


  • Presentation by Components of inflation This presentation divides elementary aggrgates into two components, according to the volatility or stability in their prices: in Core and Non-core. The disaggregation of this classification is:



    		•
    Which are the elementary aggregates that had the greatest positive difference in the weighted average regarding those obtained from the the ENIGH 2010?

    The 10 elementary aggregates with the biggest positive difference are:

    Which are the elementary aggregates that had the greatest negative difference in the weighted average regarding those obtained from the ENIGH 2010?

    The 10 elementary aggregates with the biggest negative difference are:

    Which are the elementary aggregates of greater weight in the new basket?

    Next, the 20 elementary aggregates with the highest weighting are presented: