Consumer price index - an important indicator
The consumer price index (CPI) is an important indicator as it identifies periods of inflation or deflation, large rises in CPI during a short period denotes inflation and large drops denotes deflation.
It is an important indicator to investors and most importantly to the Reserve Bank to maintain price stability by making decisions on monetary policy. It indicates the average changes in the prices of goods and services purchased by households nationwide with monthly price collections carried out in the urban areas and the index is currently taken to represent price changes in rural areas as well.
In the latest release by the Fiji Bureau of Statistics, the average annual rate of inflation for the twelve months to March 2021 stands at -2.1 per cent while the month-on month inflation rate stands at -1.2 per cent. 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. Price changes between February 2021 and March 2021 by expenditure groups are as follows:
■Food and Nonalcoholic beverages: -5.6 per cent, lower prices were recorded for bread and cereals, fish and seafood, vegetables, confectionery, food products not elsewhere classified and non-alcoholic beverages such as coffee, tea, cocoa and mineral water.
■A●coho●ic beverages, tobacco, and narcotics: -4.4 per cent, lower prices were recorded for beer, cigarettes, and yaqona.
■C●othi■g and footwear: -0.4 per cent, lower prices were recorded for garments, other articles of clothing and clothing accessories and shoes and footwear.
■Housi■g, water, electricity, gas, and other fuels: +1.6 per cent, higher prices were recorded for house paint, gas and liquid fuels.
■Fur■ishi■gs, household equipment and routine household maintenance: -0.1 per cent, lower prices were recorded for furniture and furnishings, major household appliances whether electric or not and small electric household appliances.
■Hea●th: +0.2 per cent, higher prices were recorded for pharmaceutical products.
■Tra■sport: +1.4 per cent, higher prices were recorded for spare parts and accessories for personal transport equipment, fuels and lubricants.
■Recreatio■ and culture: -0.1 per cent, lower prices were recorded for equipment for the reception, recording and reproduction of sound, picture and equipment for sport, camping and open-air recreation.
■Restaura■ts and hotels: +0.2 per cent, higher prices were recorded for restaurant meals.
■Misce●●a■eous goods and services: +0.6 per cent, higher prices were recorded for other appliances, articles and products for personal care, jewellery, clocks and watches, and other personal effects.
There were no price changes recorded in communication and education.
COVID-19 has dramatically altered the spending patterns of consumers around the globe, as people tend to avoid restaurants, bars and movie theatres.
Overall, the immediate effect on inflation from the coronavirus crisis is likely to be negative in most economies.
Accurately measuring inflation and promptly acting on it will be one of the keys for effective public policies, as governments and central banks continue to roll out roadmaps in managing the impact of the pandemic.
The RBF projects that inflation will remain in subdued with some uptick in the second half of the year due to base related effect.