What 12 countries’ measures of inflation tell us about their culture

A country’s consumer price index tracks the cost of various items over time.
A country’s consumer price index tracks the cost of various items over time.
Image: REUTERS/Rupak De Chowdhuri
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When economists calculate inflation, they’re trying to determine how prices have risen or fallen across the universe of products and services out there. But since they can’t track these changes for every item in this universe, they make up a “basket”—a collection of specific products and services based on how people live and what they typically consume in the economy. The price of the basket’s contents are factored into a consumer price index, which helps measure inflation.

The basket is divided into broad categories that are common across countries: food, for instance, or transport, or healthcare, or clothing. Each item and category is weighted, to show how much of an average household budget is spent for those goods and services—to show, essentially, what the cost of living is. This is where things become interesting. The weights accorded to each category and item are different between countries because every country’s residents spend money in different ways.

The differing weights reflect many things: cultural patterns, for instance, or levels of economic development. A country may tinker with the weights assigned to categories as well, to reflect changes in spending habits or the economy over time. The US and the UK review their baskets and the weights of categories once a year.

The items in a country’s basket, and the weights assigned to the basket’s broad categories of goods and services, can tell us a lot about how the residents of that country live. They can reveal what consumers prioritize, or what they can rely on the state to provide, or what is distinctive about their particular national economies. One useful tool for comparing weights is known as Engel’s Law. “The poorer a family, the greater the part of total expenditures must be spent on food.” That was the insight popularized by Ernest Engel, a German statistician, who compiled household expenditure data in the Kingdom of Saxony during the 19th century.  The “law” doesn’t always hold true, but it remains a useful construct when comparing how different consumers spend.

Here’s how countries weight their CPI basket categories

Using data compiled by the International Monetary Fund, we built visual comparisons of the weighted categories in the baskets of a dozen countries. Use the drop-down menu to select a country and see how the weights change.