PR consumer prices up 1.3% in May

The island CPI was down 0.2 percent from April.

The CPI was pegged at 115.8 in May, up from 114.3 during the same month last year. It was at 116 in April.

The CPI was led higher last month by increases in health care costs (4.3 percent) and food (2.3 percent) compared to the year ago period.

Recreation (1.8 percent), housing (1.2 percent), education (0.9 percent), and other goods and services (0.6 percent) were also up.

Apparel (-0.8 percent) was the only category in which prices fell.

The island’s CPI formula was revised in 2010 with the help of a group of federal and local government agencies.

Puerto Rico’s market basket, used to compute the CPI, was first calculated in 1963. The market basket is a fixed list of products and services that represents the consumption preferences of Puerto Ricans. The price of the given basket is set to equal 100 on the base year and the price changes are tracked trough time as a measure of inflation.

Puerto Rico’s basket was again recalculated in 1977, and again between 1999 and 2003 to adjust for Puerto Rico’s changing consumption habits. The study carried out between 1999 and 2003 was used to set Puerto Rico’s 2006, CPI equal to 100, the base year. Currently, 2006 is still used as the base year.

It had been widely known for several decades that Puerto Rico’s CPI was inaccurate, exaggerating Puerto Rico’s inflation. However, it was believed at the time that the 2006=100 CPI released August 2007 would resolve the issues. However, it did not and CPI continued overestimating Puerto Rico’s inflation.

The island Labor Department, in charge of calculating and publishing the CPI, studied the problem together with economists from the federal Bureau of Labor Statistics (BLS), the Puerto Rico Statistics Institute and the Technical Interagency Committee.

Based on the findings, six measures were implemented and since July 2010 the CPI is believed to serve as an accurate measurement of inflation.