The Consumer Price Index (CPI) measures the price fluctuations of goods and services, that are included in the consumption of a household in the Faroe Islands. It is an economic index, that is used to measure the price changes of the goods and services bought by the common household.
The consumer price index illustrates therefore the weighted average prices of a particular combination of consumption, that highlights the price changes from one period to another.
For each survey of the consumer price index approximately 5.800 prices of goods and services are retrieved from roughly 250 businesses and institutions. The prices of the goods differ from period to period, and the weighting of each component is crucial for how the price changes of each category effect the consumer price index.
The weighting is decided based on surveys of the spending pattern of the household. The data is collected from several registers, particularly the VAT register, and from surveys of the goods imported to the country. A separate survey is conducted for the part of the consumer price index concerning housing. In some cases, information about the spending pattern of households in Denmark and Iceland are also used.
The value of the consumer price index is set at 100 on a base year, and the value of the following years shows the average per cent change compared to the basis year.
The index depicts the annual percent change compared to a base year, that is set to 100. the difference between two years is measured in percentage point. When comparing to the base year the change is measured in per cent.