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Subsiding Inflationary Pressure According to August CPI

Subsiding Inflationary Pressure According to August CPI
Shoran Devi
September 09
11:00 2017

Marginal changes were noted in the latest release of Consumer Price Index Data for the month of August.

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 this measure, the average annual rate of inflation for the 12 months to August 2017 (ie com­paring the average CPI for the 12 months to August 2016) stands at 4.1 per cent.

The other measure compares the CPI in the current month with the CPI in the comparable month of the previous year, as such, the month-on-comparable-month infla­tion rate (compared to August 2016) stands at 1.9 per cent.

Similarly, the All Items CPI for the month of August recorded an in­crease of 0.4 per cent from 116.1 in July to 116.6 in August.

Details of price changes between July and August, 2017 by expendi­ture classes are as follows:

Food and non-alcoholic beverages: increased by 1.1 per cent

Higher prices were recorded for bread and cereals, fish and sea food, milk, cheese and eggs, fruits, veg­etables, sugar and non-alcoholic beverages such as coffee, tea, and cocoa.

Alcoholic beverages, tobacco and narcotics: increased by 1.4 per cent

Higher prices were recorded for spirits, wine, beer, tobacco and yaqona.

Clothing and footwear: reduced by 1.1 per cent

Lower prices were recorded for garments.

Health: reduced by 0.2 per cent

Lower prices were recorded for pharmaceutical products and other medical products.

Recreation and culture: increased by 0.2 per cent

Higher prices were recorded for equipment for reception, recording and reproduction, information pro­cessing equipment, recording me­dia and equipment for sport, camp­ing and open air recreation.

Expenditure classes where some price changes were recorded but the changes balanced out were:

  • Housing, water, electricity, gas and other fuel
  • Furnishings, household equipment and routine household maintenance
  • Transport
  • Miscellaneous goods and ser­vices

 

No price changes were recorded in the communication, education and restaurants and hotels divisions.

Inflation is the general increase in the prices of goods and services.

Or in other words, it refers to a situation in which you find that it takes more units of a currency to buy the same level of goods and services you bought yesterday or a year before.

Inflation data is very closely watched by the Reserve Bank of Fiji as one of the twin objectives of RBF’s conduct of monetary policy is to ensure price stability, repre­sented by maintaining average in­flation rates at around 3 per cent.

If prices are prevented from going up (inflation) or down (deflation) too rapidly, this will protect the pur­chasing power of our currency.

Consumers as well as businesses should be able to trust that prices will, on average, rise only very gradually if at all – in other words, that inflation is kept under control. Stable prices, or price stability, means that one year from now our currency will buy roughly the same as it buys today.

Price stability does not necessar­ily mean that prices are stagnating, but rather that taken as a whole, they are stable.

Strongly rising (inflation) or fall­ing (deflation) prices leads to un­certainty about the future, and this changes the way in which people behave.

For example, in anticipation of increasing prices, people will start demanding for higher paying jobs.

This will in turn lead to compa­nies factoring in this high labour costs in their product pricing.

This then has a spiral effect on the economy and as such makes it rath­er difficult to make sound economic decisions.

Hence, price stability is a neces­sary precondition for a healthy economy.

As such, the inflationary pressure have subsided and annual headline inflation has dropped further from 2.0 per cent in July to 1.9 per cent in August and is forecasted to be at around 3.0 per cent by year-end.

Source: HFC

Feedback: maraia.vula@fijisun.com.fj

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