Capital Goods Price Index - Explained
What is the Capital Goods Price Index?
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Table of ContentsWhat is the Capital Goods Price Index (CGPI)?What does the Capital Goods Price Index Measure?Academic Research on Capital Goods Price Index
What is the Capital Goods Price Index (CGPI)?
The Capital Goods Price Index (CGPI) is a statistic that monitors changes in the prices of fixed assets, as well as how changes in income affect changes in prices of these assets. CGPI is peculiar to New Zealand and it covers six types of fixed assets as used across the nation. The capital goods price index is released every quarter to reflect the difference in the prices of assets from one quarter to another. This index is used by companies in New Zealand and the government.
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What does the Capital Goods Price Index Measure?
There are six types of fixed assets that the capital goods price index measures, they are;
- Residential buildings such as commercial buildings, houses, and complexes meant for human habitation.
- Non-residential buildings such as warehouses, shopping outlets, malls, factories and others.
- Transportation equipment such as trucks and vehicles
- Land improvement which includes costs for irrigation, clearing and other activities meant to improve the land.
- Plant machinery and factory equipment
- Infrastructure project
The capital goods price index is an important metric when measuring inflation in New Zealand, this index is also applied when making monetary policy for the effective and efficient running of the economy. CGPI was published quarterly by the government of New Zealand before it was discontinued in 2015. CGPI was however included in a broader indicator of price changes called the Corporate Price Index (CPI). Other countries have indexes similar to CGPI used to measure changes in the prices of fixed assets, however, there is no direct equivalent for CGPI, not even in the United States. CGPI is specific to New Zealand.