For people looking for a simple way to track inflation, there are several online calculators that offer a number to represent price changes as percentages. The formula looks at the change in a country’s Consumer Price Index (CPI) between two dates or times, and subtracts the base year CPI to get a percent.
Different groups typically care about the prices of certain goods and services more than others, so a variety of price indexes has been developed to monitor developments in various segments of an economy. For example, household consumers are concerned about the price of items they consume like food and utilities; industrial companies, on the other hand, are concerned more about the cost of inputs, like raw materials (coal and crude oil), and intermediate products such as flour and steel.
High and unpredictable inflation rates are generally viewed as harmful to an economy, as they reduce the purchasing power of households and businesses. Inflation also makes it difficult for companies to plan and budget for the future, especially if it increases energy costs.
A common measure of inflation is called core consumer inflation, which focuses on the more persistent trends in prices by excluding items such as food and energy, which can be more volatile due to seasonal factors or temporary supply conditions. Another measure is referred to as producer price inflation, which includes the prices of commodities that are used in the production of final consumer goods such as petroleum products and precious metals.