price index
C1Formal, Academic, Business/Finance
Definition
Meaning
A statistical measure, usually expressed as a single number, that tracks and shows the average change in the prices of a specific set of goods and services over time.
A crucial economic indicator used to measure inflation, deflation, and purchasing power. It forms the basis for adjusting wages, pensions, and contracts, and is a key tool for central banks in setting monetary policy. It can refer to broad indices (like the Consumer Price Index) or specific ones (like a house price index).
Linguistics
Semantic Notes
Primarily used as a singular noun phrase, though plural 'price indices' or 'price indexes' (both correct) refers to multiple different indices. It is a hyponym (specific type) of 'economic index' or simply 'index'.
Dialectal Variation
British vs American Usage
Differences
No significant differences in meaning or usage. Spelling of the plural can favour 'indices' slightly more in UK academic contexts, while 'indexes' is common in both regions.
Connotations
Neutral and technical in both variants.
Frequency
Equally common and essential in the economics/finance lexicon of both the UK and US.
Vocabulary
Collocations
Grammar
Valency Patterns
The [NOUN: government/agency] calculates a price index for [NOUN PHRASE: consumer goods].A price index based on [NOUN PHRASE: energy costs] shows [CLAUSE: that inflation is rising].They use the price index to adjust [NOUN: pensions/wages].Vocabulary
Synonyms
Strong
Neutral
Weak
Vocabulary
Antonyms
Phrases
Idioms & Phrases
- “A canary in the coal mine (conceptual: an early warning sign, which a rising price index can be for the economy)”
Usage
Context Usage
Business
Used in reports to analyse market trends, forecast costs, and adjust pricing strategies. Example: 'The wholesale price index suggests our input costs will increase next quarter.'
Academic
Central to econometric studies, papers on monetary policy, and historical economic analysis. Example: 'The study correlated changes in the price index with shifts in income distribution.'
Everyday
Mentioned in news reports about inflation affecting household budgets. Example: 'The news said the price index went up, so everything's getting more expensive.'
Technical
Precise definitions of its calculation (Laspeyres, Paasche formulae), chaining, hedonic adjustments, and core vs. headline measures. Example: 'The core price index excludes volatile food and energy components.'
Examples
By Part of Speech
verb
British English
- The data will be price-indexed to 2020 levels.
- We need to price-index these historic values for a fair comparison.
American English
- Social Security benefits are price-indexed annually.
- The contract includes a clause to price-index the payments.
adjective
British English
- The price-index data was released early.
- We observed a price-index divergence between regions.
American English
- Price-index adjustments are applied quarterly.
- The report highlighted price-index methodology changes.
Examples
By CEFR Level
- The price index tells us if things are more expensive.
- The government publishes the price index every month.
- A sharp rise in the consumer price index forced the central bank to consider raising interest rates.
- Economists critique the current price index for failing to adequately capture quality improvements via hedonic adjustment methods.
Learning
Memory Aids
Mnemonic
Imagine a giant INDEX or list in a shop, but instead of page numbers, each item has its PRICE. A 'price index' is like a single number that summarises how all those prices on the list have moved.
Conceptual Metaphor
ECONOMY IS A BODY / THE PRICE INDEX IS A THERMOMETER. (It takes the 'temperature' of the economy, indicating health (stable) or fever (inflation).)
Watch out
Common Pitfalls
Translation Traps (for Russian speakers)
- Avoid direct calque 'ценовой указатель' – this is incorrect. The correct equivalent is 'индекс цен'.
- Do not confuse with 'price list' (прайс-лист, прейскурант). A price index measures change; a price list is a static catalogue of current prices.
Common Mistakes
- Using it as a plural without an article: 'Price index are rising' (incorrect) vs. 'The price index is rising' (correct).
- Confusing 'price index' with 'stock market index' like the FTSE or Dow Jones, which track share prices, not consumer goods.
Practice
Quiz
What is the primary purpose of a consumer price index (CPI)?
FAQ
Frequently Asked Questions
The Consumer Price Index (CPI) and Retail Price Index (RPI) are both UK price indices, but they cover different baskets of goods and use different mathematical formulas. RPI includes housing costs like mortgage interest payments, which CPI does not, and it typically gives a higher inflation figure.
A base year is chosen (index = 100). The total cost of a fixed 'basket' of representative goods and services is calculated for that year. In subsequent periods, the cost of the same basket is recalculated. The index number is found by: (Current cost / Base period cost) x 100.
The core price index excludes highly volatile items like food and energy prices. This gives policymakers a clearer view of underlying, persistent inflation trends, as temporary spikes in oil or food prices can distort the headline figure.
Yes. If the average price of the basket of goods decreases compared to the base period, the index falls below 100. This indicates deflation, a general decrease in price levels, which is a rare and often problematic economic condition.
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