The Consumer Price Index (CPI) is an economic indicator that measures the movement in prices of a basket of consumer goods and services, such as health, transportation, food and drinks.

The CPI index is calculated by taking the actual prices of goods and services and multiplying it with the weights of the goods and services of each item.

The basket of goods and services is based on a survey undertaken by the Fiji Bureau of Statistics on what a “normal” or average family consumes in the country.

This basket is reviewed periodically, normally five years.

For example, spending on mobile phones or internet was not in the CPI basket in the 1970s or 1980s but now it’s in our basket.

The change in the index is what we normally say is the inflation rate.

That is, the CPI measures the cost of goods we consume, which is different from the cost of production or GDP deflator.

In other words, changes in the CPI are used to assess price changes associated with the cost of living.

The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.

Fiji has its own unique predetermined basket of goods, which estimates what average Fiji households’ purchase nationwide with monthly price collections carried out in the urban areas [Suva, Lami, Nasinu, Nausori, Lautoka, Nadi, Ba and Labasa].

The index is currently taken to represent price changes in the rural areas as well.

The CPI weights are derived from the Household Income and Expenditure Survey [HIES] of 2008/2009.

There are two measures of inflation used in Fiji.

One compares the average CPI over the past 12 months with the average CPI over the previous 12 months.

For the other compares the CPI in the current month with the CPI in the comparable month of the previous year.

The average annual rate of inflation for the 12 months to December 2016 [i.e. comparing the average CPI for the 12 months to December 2016 with the average for the 12 months to December 2015] stands at 3.9 per cent.

While the month – on-comparable – month inflation rate [compared with December 2015] stands at 3.9 per cent.

The All Items CPI for the month of December registered an increase of 0.1 per cent over November 2016 [113.6] and stands at 113.7.

This means that prices of goods and services rose on average by 0.1 per cent over the month.

Details of price changes between November 2016 and December 2016 by expenditure class are as follows:

Food and non-alcoholic beverages increased by 0.5 per cent due to higher prices recorded for meat, milk, cheese and eggs, fruits, vegetables and confectioneries

Alcoholic beverages, tobacco and Narcotics increased by 0.5 per cent due to higher prices recorded for wine and yaqona.

Clothing and footwear decreased by 0.2 per cent due to lower prices recorded for garments and other articles of clothing and clothing accessories

Furnishings, household equipment and routine household maintenance decreased by 0.4 per cent due to lower prices recorded for furniture and furnishings, major household appliances, major tools and equipment, small tools & miscellaneous accessories and non-durable household goods.

Health decreased by 0.7 per cent due to lower prices for pharmaceutical products and other medical products.

Recreation and culture decreased by 0.7 per cent due to lower prices recorded for equipment for reception, recording and production, information processing equipment, games, toys and hobbies and equipment for sport.

Restaurants and hotels increased 0.2 per cent due to higher prices were recorded for restaurant meals.

There were no price changes in the following expenditure classes:

• Miscellaneous Goods and Service
• Education
• Communication
• Transport
• Housing, Water, Electricity, Gas and Other Fuels

Conclusion

The All Items unadjusted CPI for the month of December 2016 registered an increase of 0.1 per cent from November 2016, which stood at 113.6.

It also saw an increase of 4.3 from the same period the previous year, which stood at 109.4.9.

The annual inflation rate as at December 2016 was at 3.9 per cent lower than RBF’s forecast which was in the range of 4.0-5.0 per cent.

For end 2017, the RBF forecast a lower inflation rate of 2.5 per cent.

This forecast, is based on the assumption that global commodity prices will remain stable and there are no domestic supply side shocks.
This is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at the HFC Bank, Peter Fuata.