Inflation is typically measured using one of two indexes: the Wholesale Price Index (WPI) or the Consumer Price Index (CPI). Both measures track changes in prices, but they do so in different ways and capture different aspects of inflation. Understanding the difference between WPI and CPI can help you better understand inflation data and its impact on your business.
What is WPI?
WPI stands for ‘Wholesale Price Index’. WPI is an index that tracks and measures the prices of goods and services at the wholesale level. WPI is widely used by central banks and economic policymakers to make decisions about inflation, monetary policy, and economic growth. WPI data is released monthly by the Office for National Statistics (ONS) in the UK. WPI data can be used to track inflationary pressures in the economy as well as changes in producer pricing behavior. WPI data can also be used to assess the competitiveness of UK firms in international markets.
What is CPI?
CPI is the acronym for Consumer Price Index. CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. CPI is often used as an indicator of inflation. The CPI can be used to adjust historical dollar values (such as salaries) to account for inflation or to track real-world changes in the cost of living. CPI can also be used as a defendable measure for Automatic Cost-of-Living Adjustment (COLA) in government benefits and private contracts. While CPI has its shortcomings as an economic statistic, it is the best measure we have of general changes in the price level of a market basket of consumer goods and services. CPI data is released monthly by the Bureau of Labor Statistics.
Difference between WPI and CPI
WPI and CPI are both measures of inflation. WPI stands for wholesale price index, and CPI stands for consumer price index. WPI measures the prices of goods and services at the wholesale level, while CPI measures the prices of goods and services at the retail level. WPI is generally released monthly, while CPI is released quarterly. WPI is considered to be a more timely measure of inflation than CPI. WPI also tends to be more volatile than CPI. WPI excludes services, while CPI includes services. WPI covers a narrower range of goods and services than CPI. WPI only covers producer prices, while CPI covers both producer and consumer prices.
In this blog post, we’ve outlined the differences between WPI and CPI. We hope that you now have a better understanding of each and can apply the information to make more informed purchasing decisions for your business or organization.