Puerto Rico Economic Pulse ©

October 2007: The Dawn of a New Index for Inflation

On the new Consumer Price Index for Puerto Rico

After struggling for many years with a flawed Consumer Price Index, Puerto Rico finally has a new CPI. The previous index had become a useless tool that placed Puerto Rico amongst the top countries with highest inflation in the world.  The obsolete index proved so misleading that many economists disregarded it. Now, a new index has seen the light and has fixed many of the flaws afflicting its predecessor. The basket of the new CPI shows 3.1% inflation with food, housing, and transportation being responsible for 70% of the weight in the index. Still, we are now better poised to track inflation on the island and portray a more realistic picture of the economy. This issue analyzes the young index and opens a door for a more accurate and complete analysis of inflation in Puerto Rico.