(2.3) Differences in global CPI baskets

The following table gives an overview among different CPI baskets in the world.

CPI BasketsChinaRussiaItalyUnited States
GermanySwitzerland
Food, non-alc. drinks31.831.017.28.210.310.5
Alcohol, tobacco3.55.93.11.83.91.8
Clothing, Footware8.59.69.53.44.93.8
Actual Rentals for Housing17.2 (incl. housing energy)4.02.57.42119.0
Imputed Rentals for HousingN.A.N.A.25.1N.A.N.A.
Housing Energy and other expenses15.28.25.510.75.7
Furnishing & Household Appliances5.66.08.54.35.64.5
Health care9.64.03.87.64.015.0
Transportation10.013.816.116.413.211.6
Communication(incl. in transportation)2.93.83.12.7
Recreation & cultural13.86.66.65.811.610.2
Education(incl. in recreation & cultural)1.41.23.20.70.9
Restaurant, Hotel(incl. in recreation & cultural)2.912.05.74.48.5
Miscelleanous6.18.58.57.45.6
Total100100100100

Swiss and US data from summer 2014, remaining countries from summer 2012

 

Differences

The measurements for the euro zone, Italy, Germany and Switzerland do not include owner-occupied rent: Hence the “housing” weight in Italy are low because most Italians own their own home, while Germans or Swiss rather rent. The basket of other countries (incl. Sweden) contains owner-occupied rent.

Typically poorer countries have a basket with a higher weight for food and other consumption goods. With time the part of food decreases.

Chinese inflation basket

Typically poorer countries have a basket with a higher weight for food and other consumption goods, but richer states give them a smaller weight. Here the full details over different countries - Click to enlarge

The real Chinese CPI basket effectively contains 31.8% food, but the Swiss basket has only about 11.0% in this category.

In the year 1939 the US basket contained 35% food, today it is around 15% – when restaurants are included. Between 1939 and 1984 the importance of transportation in the U.S. basket increased from 8 to 24%. After that it slowed to 17% today again.

Recently the importance of the food category has risen again; reasons are higher global food prices and health awareness. The Japanese, for example, spend 2.2% of their income on fish and seafood (vs. US 0.3%) and 3.7% on fruit and vegetables (vs. US 1.3%).

CPI Basket 1939-1987source BLS

1980s: Basket Adjustment away from Transportation and Food Towards Durables and Services

In the 1970s rising food and transportation costs were one driver of the inflationary period. Still in 1984 these two categories took 45.5% of U.S. basket, compared to 25% today.

In the 1980s and 1990s the purchasing baskets were re-adjusted from the previously quickly rising food and energy prices towards durable goods and services. This was one of the reasons why bond yields receded (see also the 1990s).

Bond yields 1980 1987 1990 1991 Italy Germany France Netherlands Spain

Falling Bond yields in the 1980s

2000s: Basket Adjustments Away from Durables towards Services

Since the early 2000 durable goods continue to fall in price, while prices of services are rising.

Price Indexes for Personal Consumption Expenditures on Goods and Services

Click to enlarge.

 

 

This slowly triggers an adjustment of the CPI basket towards services. Housing is also considered a service.

The durables like vehicles, clothes or household appliances lose their share.

 

United States CPI basket Weight in 2001 Weight in 2015
Purchase of vehicles 6.5% 5.2%
Clothing and Footwear 4.2% 3.4%
Furnishing, Household equipment 3.7% 3.3%
Housing 30.1% 32.7%
Services less Housing 30.1% 31.4%

 

—————————————

Back to purchasing power parity.

 

Read also:

OECD, global CPI baskets

In China, the Consumer Price Index (“CPI”) is becoming more and more of a joke. What’s in China’s CPI Basket? Seeking Alpha in 2011

 

George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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