Marginal Change Noted In July Consumer Price Index

 

The Consumer Price Index (CPI) also known as the cost of living index is compiled to indicate average changes in the prices of goods and services purchased by households nationwide.

It is used to help determine the performance of an economy and to gauge the present inflation rate.

Inflation is a sustained increase in the cost of living or the general price level and is measured by the annual percentage change in consumer prices.

Inflation has many repercussions on the ultimate pockets of individuals as well as at a macroeconomic level and perhaps the reason why the CPI data is one of the highly sought data for market participants.

Inflation hurts the buying power, if your income doesn’t increase or increases at a slower rate than general inflation.

It makes your borrowing cheaper if you have an existing loan facility at a fixed rate but not a good news for those on adjustable rate loans.

It makes long term savings less attractive and affects your retirement plan as your savings will buy less as time goes on.

Inflation has a negative effect on the balance of payment by dampening our export sales as other countries find our goods more expensive.

Also, with inflation rising and real wages remaining low, the standard of living is also likely to take a hit.

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.

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. In this regard, the average annual rate of inflation for the twelve months to July 2017 (i.e. comparing the average CPI for the 12 months to July 2017 with the average for the 12 months to July 2016) stands at 4.4 percent.

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

In this regard, the month-on-comparable-month inflation rate (compared to July, 2016) stands at 2.0 percent.

Details of price changes between June and July 2017 by expenditure class are as follows:

Food and non-alcoholic beverages: reduced by 0.3%

Lower prices were recorded for fruits, vegetables, food products n.e.c. and non-alcoholic beverages such as mineral water.

Alcoholic beverages, tobacco and narcotics: increased by 4.6%

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

Clothing and footwear: increased by 0.2%

Higher prices were recorded for cloth materials, garments and shoes & footwear.

Housing, water, electricity, gas and other fuel: reduced by 1.3%

Lower prices were recorded for gas, liquid fuels and solid fuels.

Furnishings, household equipment and routine household maintenance: increased by 0.2%

Higher prices were recorded for furniture & furnishings, small electric household appliances and non-durable household goods.

Health: increased by 0.3%

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

Transport: reduced by 0.5%

Lower prices were recorded for bicycles, spare parts and fuels & lubricants.

Recreation and culture: reduced by 0.2%

Lower prices were recorded for equipment for reception, recording & reproduction, photographic & cinematographic equipment, information processing equipment and games, toys & hobbies.

Restaurants and Hotels: increased by 1.1%

Higher prices were recorded for restaurant meals.

Miscellaneous goods and services: reduced by 0.1%

Lower prices were recorded for appliances, articles & products for personal care.

No price changes were recorded in the Communication and Education division.

Although CPI is the most widely used measure of inflation, the CPI data alone cannot be used as a measure of the total change in living costs.

In practice many adjustments are made to CPI and different versions of CPI are calculated to cater to real life needs.

While prices are projected to remain stable in the near term, certain policy measures announced in the National Budget are expected to influence inflationary outcomes in the coming months. Nonetheless, inflation is projected to be around 3.0 percent by year-end.

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.

 

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