Equilon FXInside the
basket.
Move a component weight and see how a headline can hide very different price changes.
3.60%
Price change in this fixed-weight, two-part basket.
A 20% energy share contributes 2.00 percentage points to the headline.
A contribution is a weight times a change
The example starts with a basket value of 100: energy accounts for 20 and everything else for 80. Energy rises 10% to 22; other spending rises 2% to 81.6. The same fixed basket now costs 103.6, an increase of 3.6%.
The simplification matters
There are only two components, fixed starting weights and one comparison period. Published inflation indexes use more detailed coverage, weighting and formula conventions. This is not a reproduction of CPI, HICP or PCE. It shows why a component’s price change and its contribution to the headline are different numbers. See Eurostat’s HICP documentation.