Consumer price index adopts new weights

The Zimbabwe National Statistical Office has said the new weights for the Consumer Price Index will come into effect in January 2013.

Under the new structure, communication has been given more weights at 3,41 from 0,99 while Furnishing Household Equipment and Routine Maintenance weight was lowered to 9,91 from 15,11 — a difference of 5,20.

In a statement on the prices report and the Population census preliminary results, Zimstat chairman Doug Hoto said the new weights of the CPI and the rate of inflation were produced using data from the Poverty Income Consumption and Expenditure Survey 2011/12 as part of a series of products coming from this survey.

Economists argued the existing methodology was outdated and did not fully represent current expenditure patterns.

They also argued some of the components in the basket were obsolete. Housing, water, electricity, gas and other fuels take up a greater proportion of the average income, much more than food. However, food and non-alcoholic beverages have a greater weight of 31,9 against 16,2 for housing, water, electricity, gas and other fuels.

The changes to the weightings will make the basket accommodate current happenings. The present basket is made up of 68 commodities under 12 components. New weights will also be assigned to the commodities to reflect their relative importance in current household consumption.

Meanwhile, November inflation dropped 0,39 basis points to 2,99% from the October rate of 3,38% after clothing and footwear put downward pressure on the performance of the CPI.

The downward trend in inflation is attributed to fluctuations in real demand for goods and services largely because of low disposable income for the majority of the public. This is attributed to the persistent liquidity crunch in the economy resulting in limited cash flows.

Prices of basic goods and services have generally remained stable owing to lack of room for retailers to raise prices because disposable incomes are not growing due to the economy’s illiquidity.
The economy is now characterised by stagnant salaries and wages with minimal adjustments being made as this will leave less money for working capital.

However Hoto said the country was facing significant inflationary pressures emanating from poor harvest in the last season, demand for rental accommodation and increasing utility prices.

The year-on-year food and non-alcoholic beverages stood at 3,85%, whilst non-food inflation stood at 2,61%.

Month-on-month inflation in November 2012 was 0,13% dropping 0,13 percentage points on the October 2012 rate of 0,26%.

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