How The Bhutanese miscalculated inflation

Every year prices increase in Bhutan. This is inflation. Here are the inflation figures from the last 5 years, as taken from an article on Bhutan's inflation in The Bhutanese.

• 2008: 8.31%
• 2009: 4.41%
• 2010: 7.02 % 
• 2011: 8.86% 
• 2012: 10.93%.

The inflation from 2008 to 2012 was 46.1%. According to the article, however, it was 39.5%. The reporter calculated that number by wrongly adding the percentages. This is a mistake.

Imagine that the annual inflation is 20%. If one kg of ema costs Nu 100, the next year the price inflates to Nu 120. And the next year? 20% on top of Nu 120, which is Nu 144. The total inflation in two years was 44%, not 40%.

If you do the math right, you'll end up with a 5-year cumulative inflation of 46.1%, not 39.5%.

Other figures in the story are also misleading. Hopefully the paper will publish a revised article with the correct numbers.