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HFC Bank

The Consumer Price Index or CPI is compiled to indicate average changes in the price level of a basket of consumer goods and services purchased by households. With monthly price
09 Apr 2016 10:00
HFC Bank

The Consumer Price Index or CPI is compiled to indicate average changes in the price level of a basket of consumer goods and services purchased by households.

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 & Expenditure Survey of 2008/2009.

The average annual rate of inflation for the twelve months to February 2016 stands at 1.3 per cent while the month-on comparable-month inflation rate stands at 1.2 per cent.

Graph 1 show that the annual average inflation rates began to fluctuate at an upward trend from January 2015 and reached its peak in December 2015 and January 2016 where it stands at 1.4 per cent and then begins to ascend again.

So we can say that the prices of goods and services were high during these months because of December being a festive season and January being the “back to school” month.

The February All Items CPI registered an increase of 1.2 per cent when compared to January 2016 which stands at 108.9.

Two measures of inflation is used in Fiji, one compares the average CPI over the past twelve months with the average CPI over the previous twelve months while the other compares the CPI in the current month with the CPI in the comparable month of the previous year.

 

Details of price changes between February 2016 and January 2016 by expenditure class are as follows:

 

  • Food and Non-alcoholic Beverages: +0.8% Higher prices were recorded for fruits, vegetables, non-alcoholic beverages including coffee, tea and cocoa.
  • Alcoholic beverages, tobacco and narcotics: +1.1% Higher prices recorded for tobacco and yaqona.
  • Clothing and Footwear: +0.2% Higher prices were recorded for clothing materials, garments and shoes & other footwear.
  • Housing, Water, Electricity, Gas and Other Fuels: +0.0% No price changes were recorded in this division.
  • Furnishings, Household Equipment and Routine Household Maintenance: -0.9% Lower prices were recorded for household textiles, major household appliances electric or not, small electric household appliance, glassware, tableware & household utensils, major tools & equipment and non-durable household goods.
  • Health: +0.7% Higher prices were recorded for pharmaceutical products.
  • Transport: 0.0% Some price changes were recorded in this division but these balanced out.
  • Communication: Lower prices were recorded for telephone & telefax equipment.
  • Recreation and Culture: 0.0% Some price changes were recorded in this division but these balanced out.
  • Education: +9.0% Higher prices were recorded for pre-primary education and tertiary education.
  • Restaurants and Hotels: -0.2% Lower prices were recorded for restaurants, cafes & the like.
  • Miscellaneous Goods and Services: -0.5% Lower prices were recorded for other appliance, articles & products for personal care, jewellery, clocks & watches and other personal effects.

 

Inflation

An increase in CPI means an increase in the cost of living or inflation.

Inflation is simply the rate at which prices of goods and services are rising and consequently, the purchasing power of currency is falling.

A moderate inflation rate is good for an economy while too much inflation or its opposite deflation is bad for the economy.

The Reserve Bank of Fiji manages inflation and deflation by using monetary policy.

The full effects of TC Winston have not been covered in the February release.

Usually after a natural disaster, due to damaged crops, food prices are pushed up and reconstruction efforts will increase materials prices and falling unemployment will intensify wage pressures, keeping inflation elevated in coming months.

But we will not expect a hike in the CPI for March, 2016 since the Government and the Consumer Council of Fiji was coming down hard on traders and businesses to refrain from price gouging and any trader caught was fined.

nThis 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.

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