Chile’s statistics agency, the INE, is facing concerns over its calculation of consumer prices. In particular, the cost of clothing has fallen 6.2 per cent in the last four years, while the overall inflation index has increased by almost 30 per cent.

This is notable given that most clothing is imported and the peso has weakened by about 20 per cent over that period. While adding footwear to the calculation helps, Chile still stands in contrast to Mexico and most other countries in the OECD where prices have risen. Despite overhauls of the methodology in 2013 and 2019, the discrepancy remains. This is significant in a country where about half of all Treasury bonds are index-linked.

The INE has highlighted that annual variations have been contained since the last changes in 2019 and that the figures are in line with international levels. The agency also suggested that price cuts during the pandemic to clear stock and competition from stores’ own brands had depressed prices. However, there are concerns that significant errors in the calculation of clothing prices would mis-price index-linked bonds and alter contracts.

Experts have noted that measuring clothing prices is notoriously difficult, but there are signs that the INE may be getting it wrong. The price of men’s clothing has fallen 9.3 per cent since January 2019 and women’s clothing is down 21 per cent, while school uniform prices have gone up 32 per cent.

While progress has been made in terms of measuring clothing prices, it is important for the INE to continue to carefully consider all components of the CPI to ensure that the best formula possible is used to measure inflation.