Statistics Division sheds light on Consumer Price Index calculations

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Local statisticians are seeking to clarify how they determine the average prices of everyday goods, which they say decreased over the first seven months of this year.

Data released this week indicated the average prices of a variety of items – including clothing, shoes and food from a cross-section of stores – had dipped between January and July.

Research officer Jerry Aska said there was misunderstanding about how the statistics in the Consumer Price Index (CPI) are gathered.

CPIs are used across the world to measure the average prices of a basket of consumer goods and services, such as transport, food and medical care. They are calculated by taking price changes for each item in a predetermined basket of items and averaging them.

Fluctuations in the CPI are used to assess price changes associated with the cost of living, along with inflation and deflation.

“What we do is look at a comparison of what an item would have cost today compared to 12 months ago – that is how we look at inflation,” Aska said.

“We collect prices from six major supermarkets. Each supermarket does not necessarily carry the same brands so we take a variety of brands. We take all prices for specific items sampled; we then develop an average price.”

He explained that a specific formula – using an index level starting at 100 – is applied.

“From month to month you have a price change, a ratio. You simply multiply that ratio by the index level. That’s how we measure price changes.

“We don’t measure individual price changes; we look at an aggregated format of all items across all outlets.”

He said, for example, researchers will collect at least six different brands of rice across all the supermarkets evaluated.

“If I buy Kellogg’s cornflakes at an average price of $20 dollars and that supermarket discontinues Kellogg’s and you have a substitution, based on the index levels … when it comes around again the price level is going to be different and you will see a decline in that index. Persons are not factoring in some of these things,” he said.

Some categories of food – for example – had seen an increase in price, Aska explained.

“Every category has a share weight,” he continued. “We hear that we eat a lot of chicken. Chicken has significantly more weight in our expenditure than pork and beef. So if you have a reduction in poultry costs it has an overall impact on the meat category and an overall impact on the category of food.

“There are categories within food that can have a significant impact – whether a downward or upward movement – on the food index.”

Aska said prices fluctuations in Antigua and Barbuda followed a similar pattern to countries worldwide.

He added, “Our methodology is no different; we import almost the same items … and we follow the same procedures and best practices they use.”

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