CPI REPORT latest

CIVIL ENGINEERING DEPARTMENT
QUANTITY SURVEYING

PREPARED FOR :

PUAN NORLEEZA BINTI MUHAMMAD

PREPARED BY :

STUDENT’S NAME MATRIX NUMBER

NUR FAQIHAH BINTI ZULHILMY 15DUB21F1064

NOR HANI HAZLIN BINTI MOHD NOR 15DUB21F1022

AFRINA AFIQAH BINTI MOHAMMAD AKMAL 15DUB21F1012
RIDZWAN

UMAIRAH ABU SEMAN 15DUB21F1042

NOR AMIRA HUMAIRAA BINTI NOR AZMI 15DUB21F1018

Table of contents

1.0 Description…………………………………………….
2.0 Methodology…………………………………………..
3.0 How is CPI calculated ?……………………………………….
4.0 Uses of CPI…………………………………………….
5.0 The importance of CPI………………………………
6.0 Benefits of CPI………………………………………….
7.0 How is CPI worked ?………………………………….
8.0 Core CPI……………………………………………….
9.0 Limitation of CPI………………………………………
10.0 Conclusion……………………………………………
11.0 Reference……………………………………………..

CONSUMER PRICE INDEX (CPI)

1.0 Description

The Consumer Price Index (CPI) is a measure of the aggregate price level
in an economy. The CPI consists of a bundle of commonly purchased goods and
services. The CPI measures the changes in the purchasing power of a country’s
currency, and the price level of a basket of goods and services. In other words,
the consumer price index calculates the changes in price of a common basket of
goods and services. It is also called a market basket and is used for calculating
the price variations in fixed items.

2.0 Methodology
The wide range of products and services is divided into twelve categories

by the United Nations' "Classification of Individual Consumption by Purpose
(COICOP). There are food and non-alcoholic beverages, alcoholic beverages
and tobacco, clothing and footwear, housing, water, electricity, gas and other
fuels, furnishings, household equipment and routine household maintenance,
health, transport, communication, recreation services and culture, education,
restaurants and hotels and decorations hardware and maintenance.

3.0 How is CPI Calculated?
Imagine a shopping basket and fill it with items we might be given. Then

determine the cost of the goods from time to time. The change in the cost of
goods in this cart is the actual price change used to measure the CPI. The CPI
basket contains 530 Goods and Services purchased by households in Malaysia.
examples we can take are groceries and daily necessities, house rental rates,
electricity and water bills, petrol and tolls, barbershops etc.

4.0 Uses of the Consumer Price Index (CPI)
Consumer Price Index or just called CPI that has the uses of this.There are

three uses of the Consumer Price Index(CPI).Firstly,to serve as an economic
indicator.The Consumer Price Index is a measure of the inflation faced by the
end user. It can determine the purchasing power of the dollar. It is also a proxy
for the effectiveness of a governments economic policy.An economic indicator
is a piece of economic data, usually of macroeconomic scale, that is used by
analysts to interpret current or future investment possibilities. These indicators
also help to judge the overall health of an economy.

Secondly,uses of the Consumer Price Index(CPI) is to adjust other
economic indicators for price changes: For example, components of national
income could be adjusted using CPI.The most well-known indicator of inflation
is the Consumer Price Index (CPI), which measures the percentage change in
the price of a basket of goods and services consumed by households.

Lastly,provides cost of living adjustments for wage earners and social
security beneficiaries and prevents an inflation-induced increase in tax rates.A
cost-of-living adjustment (COLA) is an increase made to Social Security and
Supplemental Security Income (SSI) to counteract the effects of rising prices in
the economy or just called inflation.

5.0 The importance of CPI

The CPI measures the rate of inflation, which is one of the biggest threats to
a healthy economy. CPI is also widely used to determine inflation in an
economy.

Rising inflation can lead to a decline in the living standards of a country's
population. Inflation can also destroy the living standards of the population if
the income rate of the population is not in line with the increase in the price of
goods. For example, the rising price of kitchen items can affect the life of a
resident whose income may not be in line with the increase in the price of such
goods. Thus, with a sharp rise in prices for all costs will result in manufacturers
only being able to produce less and may have to lay off workers.

6.0 Benefits of Consumer Price Index ( CPI)

The CPI measures the rate of inflation, which is one of the greatest threats
to a healthy economy. Inflation eats away at your standard of living if your
income doesn't keep pace with rising prices—your cost of living increases over
time. A high inflation rate can hurt the economy. Everything costs more, so
manufacturers produce less and may be forced to lay off workers. The CPI
allows us to gauge these factors.

7.0 How is CPI worked?

Consumer Price Index (CPI): Measures the price of goods and services
that are usually consumed by consumers in Malaysia over a period of time. The
CPI is used as a proxy to measure and determine the rate of inflation. Each item
in this basket has an importance or weightage that represents a percentage of
household spending. For example, consumers in Malaysia spend more on petrol
than public transport. Thus, gasoline has a greater weightage than public
transport in the CPI. Like the example we took, the basket that represents the
CPI, this basket represents the pattern of Malaysian consumer spending that
changes over time. For example in the past, cell phones, and now smartphones.
This basket is updated periodically to ensure that the CPI remains representative
of consumer spending patterns. If we refer to the Official Portal of the
Department of Statistics Malaysia, Almost 180 thousand prices of goods are
collected in the same store, for the same goods every month in various locations
throughout the country. For example in markets, grocery stores, supermarkets
etc. Any changes in the quantity or quality of goods collected are also taken into
account. We can take the example that the size of the milk carton is reduced
while the price does not change, indirectly the consumer is not aware that he has
paid more for the milk. Therefore, price adjustments are made so that these
changes are reflected in the CPI.

8.0 Core CPI

The Core CPI is a version of the Consumer Price Index that excludes
volatile items like food and energy from the calculation. Some economists do
this because they believe that the price trend will be badly impacted due to the
volatility character of these commodities.

9.0 Limitations of Consumer Price Index (CPI)

Consumer Price Index or just called CPI is have the limitations.Firstly,the
Consumer Price Index may not be applicable to all population groups.For
example, CPI-U (Urban) better represents the U.S. urban population but doesn’t
reflect the status of the population in rural areas.The key limitation is that the
CPI doesn’t apply to all population groups so it doesn’t take into account the
buying habits of people living outside urban or metro areas. Also, it doesn’t
consider the prices they’re paying for the things they buy. So in that sense, it’s
not a true measure of how much price inflation the entire country experiences.

Secondly,limitations of Consumer Price Index (CPI) is CPI doesn’t
produce official estimates for subgroups of a population.CPI doesn't produce
official estimates for subgroups of a population. CPI is a conditional cost-of-
living measure and does not measure every aspect that affects living standards.
Two areas can't be compared. A higher index in one area compared to the other
doesn't always mean that prices are higher in that area.

Lastly,limitations of CPI is a conditional cost-of-living measure and does
not measure every aspect that affects living standards.The Consumer Price
Index, or CPI is a measure of inflation calculated by US government
statisticians based on the price level from a fixed basket of goods and services
that represents the purchases of the average consumer.

10.0 Conclusion

The conclusion that we can describe in this whole report is to improve the
economic output and living standards of the people in a country is, we as
Malaysians must strive to improve the factors that affect the economy of a
country, such as tourism factors. With the increase in tourism factors, the
country is able to increase the value of the national currency which in turn will
lead to the improvement of the economy of a country.

11.0 Reference

1. https://byjus.com/commerce/what-is-consumer-price-index-in-simple-
terms/

2. https://www.economy.com/malaysia/consumer-price-index-cpi

3. https://www.thebalance.com/consumer-price-index-cpi-index-definition-
and-calculation-3305735

4. https://corporatefinanceinstitute.com/resources/knowledge/economics/co
nsumer-price-index-cpi/

5. https://www.investopedia.com/terms/c/consumerpriceindex.asp#:~:text=
The%20Consumer%20Price%20Index%20(CPI)%20measures%20the%2
0monthly%20change%20in,of%20aggregate%20U.S.%20consumer%20s
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