Consumer price indices have a long history in official statistics. They measure the erosion of living standards through price inflation and are probably the best known economic statistics among the media and general public.

A variety of tools are used to measure price changes taking place in an economy. These include consumer price indices (CPI), price indices relating to specific goods and/or services, GDP deflators and producer price indices (PPI). Whereas CPIs are designed to measure changes over time in average retail prices of a fixed basket of goods and services taken as representing the consumption habits of households, the purpose of PPIs is to provide measures of average movements of prices received by the producers of commodities. Producer price indices measure changes in prices at an early stage in the production process. Because of this, they are often seen as advance indicators of price changes throughout the economy, including changes in the prices of consumer goods and services.

Long-term interest rates are one of the determinants of business investment. Low interest rates encourage investment in new equipment and high interest rates discourage it. Investment is, in turn, a major source of economic growth.

To compare a single country’s real GDP over a period of years, it is necessary to remove any movements that are due to price changes. In the same way, in order to compare the real GDPs of a group of countries at a single point in time, it is necessary to remove any differences in their GDPs that are due to differences in their price levels. Price indices are used to remove the effects of price changes in a single country over time; purchasing power parities (PPP) are used to remove the effects of the different levels of prices within a group of countries at a single point in time.

A broad interpretation of international competitiveness would involve comparison of the success of different countries in raising productivity, fostering innovation and improving living standards. The two competitiveness indicators shown here have a narrower objective – namely to measure changes in a country’s price competitiveness in international markets based on changes in that country’s exchange rate and price level (either consumer goods prices or unit labour costs in manufacturing) relative to those of its competitors. In addition, we present indices of nominal effective exchange rates. This indicator reflects only variations in market exchange rates, which is just one of the factors that enter the calculation of the two competitiveness indicators mentioned above.