The consumer price index (CPI) or year-on-year inflation for June this year was recorded at 2.7 percent.
This means, on average, the consumers are paying 2.7 percent more than what they did in June 2018 for the goods and services.
The CPI measures average change in prices over certain period that consumers pay for a basket of goods and services, which is commonly known as inflation.
The basket of the goods and services is a sample of commodities selected using the household expenditure data.
Prices of the sampled goods and services are collected from urban areas in 20 Dzongkhags on monthly, quarterly and annual frequency depending on the price volatility of the items.
The National Statistics Bureau (NSB) has identified a total of 113 items (314 varieties), classified according to consumption pattern from where prices are gathered about 450 outlets are selected for pricing.
Each commodity is attached with weights that reflect the relative importance or share of the individual item to the total consumption expenditures of the households. It determines the impact an individual item will have to the overall inflation.
For instance, 45.9 percent of the weights are assigned to food items, including beverages and the rest is assigned to non-food items.
Inflation in food is recorded at 3.1 percent, meaning that the prices of food items as of June this year increased by 3.1 percent compared with June last year.
Among the non-food group, restaurant and hotel services witnessed a price increase of about seven percent between June last year and June this year.
Usually, price inelastic goods such as example fuel and rice, whose prices does not affect the demand and supply, are given more weights because of its importance to every household consumption basket.
Since inflation also derives purchasing power of Ngultrum (PPN), Nu 100 in June 2019 is worth only Nu 72 at December 2012 prices.
The PPN dropped by 2.73 percent in the past 12 months (from June 2018 to June 2019) due to price increase in the economy.