Consumer price index base year changing to 2012 in March
THE Philippine Statistics Authority (PSA) said the base year for the consumer price index (CPI) will change to 2012 beginning in March.
The PSA said the change will take place in the next release of CPI for All Income Households on March 6.
“[T]his will include monthly CPI from January 2012 to February 2018. Data users will expect two sets of the CPI as the new series shall be issued simultaneous with the 2006-based series until June 2018. CPI series for July 2018 onwards shall be 2012-based,” the PSA said.
The PSA said that rebasing is “necessary,” as the current reference “no longer represents” household behavior and “would tend to give wrong market signals.”
“Economic, social and technological changes may have influenced Filipinos’ tastes and preferences and these, in effect may have resulted in changes in the consumption patterns,” it said.
Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines said that the rebasing would “naturally make a difference, but not big.”
“Nominal prices usually do not capture the real information about the level of prices. A base year is needed to compare ‘apples to apples,’” he said.
However, he added that CPI must also reflect the times. “There should be an alternative to PSA’s measure of inflation. There are a lot of commodities bought outside the supermarket, such as online. How do we measure that?”
He cited Japanese publication Nikkei’s CPINow as an example of a “detailed” measurement. The Nikkei CPINow index is a daily price gauge based on pointofsale data in supermarkets nationwide.
For the 2012-based CPI, the PSA will adopt the chain method for the first time. “This activity involves assigning weights to the commodity groups/sub-groups. This reflects the consumption priorities of households and the way they allocate resources to meet their needs,” it said.
The weights will be derived from expenditure data of the 2012 Family Income and Expenditure Survey (FIES) — which monitors the expenditure of around 50,000 sample households nationwide.
“This is a good move. The FIES is a disaggregated data of household consumption. It is very accurate in terms of buying behavior,” Mr. Asuncion commented.
Nomura, a Japanese financial services group, said inflation is “tricky to calculate” in its report “First Insights — Philippines: CPI rebasing from 2006 to 2012 finally announced” released yesterday.
“[W]hether this rebasing will bias the inflation readings up or down… we do not know the exact weighting changes of all the items in the basket. However, we believe it is likely to introduce a small upside bias, largely because of the impact of recent tax reforms. We believe the more discretionary, big-ticket items tend to have their weightings increased in these exercises. These are the same items (e.g., utilities, beverages and tobacco, transport and telecommunication services) that have arguably experienced significant price rises due to the tax reforms at the beginning of the year, in addition to higher oil prices,” it said.
“In our view, BSP will unlikely judge a shift in its inflation outlook in either direction just because of the rebasing,” Nomura said.
“We reiterate our forecast for BSP to hike its policy rate by 25 basis points at its 22 March meeting, driven by rising inflation expectations and risks of its 2-4% inflation target being breached,” it added. —