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New weights for South Africa’s CPI in January 2013

New weights for the Consumer Price Index will be introduced in the January 2013 release, Patrick Kelly, Executive Manager: Price and Employment Statistics at Statistics SA said on Thursday.

Kelly told a briefing in Johannesburg that key improvements from the last weighting were that the weights would be introduced four years from the previous reweighting (the international norm is five years) and that the lag between completion of the survey and the introduction of these weights into the index would be one-and-a-half years compared with the two-and-a-half years last time round.

"The weights will mainly be based on the 2010/11 Income and Expenditure Survey (IES) and where necessary, alternative data sources will be used to correct for under or over reporting in the IES," Kelly added.

A basket would be determined for each collection area - each primary and secondary area within a province.

Currently, the baskets were determined only at a provincial level.

"This will help to make the specific baskets more relevant to each local area," Kelly said.

"We will price update the weights to account for any price changes in the period between the survey and the implementation of the results."

Other changes included the rebasing of the CPI indices to 2012 with the time series being maintained, meaning that the published rates of change would not be altered through the rebasing.

A properly designed rural PPI would be constructed.

"The intention is to collect food items in rural areas as a start. The monthly CPI publication will feature a national rural CPI with product breakdowns," Kelly said.

Statistics SA also planned to introduce a new analytic measure of core inflation - a trimmed mean, he added.

The trimmed mean would be calculated by ordering the CPI product groups by their price change in the month and taking the expenditure weighted average of the middle 90% of these price changes.

Price updating involved applying an inflation rate to the weights to account for the impact of abnormal price changes in significant products.

Kelly said that a peer review of the present CPI had been initiated and that international CPI expert David Fenwick, previously the head of Price Statistics at the Office for National Statistics in the UK, had found Statistics SA's CPI to be "generally of a good quality, adhering to many of the relevant international standards and to recognised good practices in index construction and in statistical production more generally."

Fenwick also found that the statistical foundation of SA's CPI had not been stronger than it was at the time he had reviewed it.

Fenwick wrote that Statistics SA was committed to maintaining a high level of professionalism and transparency and this was appreciated by users.

"It also shows a high level of commitment to collecting good quality data, to methodological soundness to publishing reliable indices."

Kelly said the aim of commissioning the review had been to identify opportunities for further improvement of SA's CPI.

To this end Fenwick's r4eview had made 26 recommendations for possible improvement.

"Of these, 13 concerned the methods employed to calculate the CPI and the remaining 13 are focused on improving the operational efficiency of the collection and editing processes."

One of the methodological recommendations dealt with the coverage of rural areas and the informal sector, Kelly said.


Credits: Janice Roberts /BUsiness Live


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