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CPI Shows Changes In Expenditure Classes

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 Financial Markets Analyst at
24 Jun 2017 10:00
CPI Shows Changes In Expenditure Classes
Shoran Devi

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 Financial Markets Analyst at the HFC Bank, Shoran Devi.

 

While there are many indicators which helps determine the performance of an economy, the Consumer Price Index [CPI] is one of the highly sought data for economic watchers in financial markets.

It is one of the top macroeconomic indicators which is closely monitored on its month on month as well as year on year performance.

Estimating CPI involves surveying people to identify what they purchase on regular basis. This helps determine the basket of commonly used goods and services.

The CPI data is released every month and monitors the trend of inflation and changes in the purchasing power of our domestic currency.

It reflects the changes in the prices paid by urban consumers for a representative basket of goods and services.

The most common measure of inflation is the year-on-year change in the CPI index.  In this regard, the annual inflation declined from 4.1 per cent in April 2017 to 2.5 per cent in May.

This was the lowest rate since March 2016 and the first time in past 13 months that inflation fell below 3.0 percent.

 

Details of price changes between April and May 2017 by expenditure classes are as follows:

Food and non-alcoholic beverages: reduced by 1.9 per cent.

Lower prices were recorded for milk, cheese and eggs, fruits, vegetables, confectioneries and food products.

 

Alcoholic beverages, tobacco and narcotics: increased by 0.2 per cent

Higher prices were recorded for spirits and beer.

 

Clothing and footwear: reduced by 0.1 per cent

Lower prices were recorded for clothing materials, garments, other articles of clothing and clothing accessories and footwear.

 

Housing, water, electricity, gas and other fuel: 0.0 per cent

There were some price changes recorded in this division but these changes balanced out.

 

Furnishings, household equipment and routine household maintenance: reduced by 0.1 per cent

Lower prices were recorded for furniture and furnishings, glassware, tableware and household utensils, small tools and miscellaneous accessories and non-durable household goods.

 

Health: 0.0 per cent

There were price changes recorded in this division but these changes balanced out.

 

Transport: reduced by 0.2 per cent

Lower prices were recorded for motor vehicles.

 

Recreation and culture: increased by 0.2 per cent

Higher prices were recorded for equipment for reception, recording and reproduction, information processing equipment, games, toys and hobbies and equipment for sports, camping & open air recreation.

 

Miscellaneous goods and services: increased by 0.3 per cent

Higher prices were recorded for appliances, articles and products for personal care.

No price changes were recorded in the following divisions:

Communication, Education and Restaurants and Hotels.

 

There are two measures of inflation 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.

Because the true rate of inflation cannot be observed, we can use the CPI (and similar price indexes) to help us approximate the true inflation rate.

In practice many adjustments are made to CPI on account of seasonality, changes in composition of the basket and the likes. Different versions of CPI are calculated to cater to real life needs.

The Reserve Bank of Fiji compiles an underlying measure of inflation called trimmed mean.

Under this measure, the impact of temporary price changes are excluded from headline inflation to determine the actual trend.

Trimmed mean inflation over the past decade averaged around 2 percent.

 

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