There is no error in Statistic South Africa’s (Stats SA) calculation of the official inflation rate, which is the best measure currently available of changes in consumer prices, the agency said on Wednesday.
Investec Asset Management on Tuesday criticised Stats SA’s calculation of May’s inflation rate of 10,9% — saying it was overstated by 2,2 percentage points because the statistics office delayed the re-weighting of product categories in the consumer price index (CPI) by two years.
However, Stats SA said the re-weighting and rebasing of the CPI is taking place according to a clearly planned schedule ”and the process has not been delayed”.
Early in 2007 Stats SA announced that the new CPI weights based on the 2005/06 Income and Expenditure Survey would come into effect in 2009.
”The organisation has since kept the public and the Statistics Council informed about a number of developments, including the release of a new basket of goods and services to be included in the CPI and, more recently, the new official weights,” it said.
Stats SA said that recent press reports based on an analysis of consumer price inflation by Investec Asset Management suggest an error in the calculation of the CPI, resulting in an overstatement of the annual inflation rate.
”The difference between Stats SA’s official inflation rate and Investec’s estimates arises from the re-weighting and rebasing of the CPI to be implemented in 2009.
”It is important to note that there is no error in Stats SA’s CPI calculations.”
Any difference in the rate of inflation given the old and new weights is not the result of errors but of a careful and logical process of keeping up with current changes in the economy as far as practically possible, Stats SA said.
It pointed out that re-weighting and rebasing in many advanced economies takes place with intervals of three to 10 years.
”In most cases, South Africa included, base-period weights are used in the CPI, which implies that the weights always refer to a previous period and inevitably introduce a measure of bias.
”While no CPI is free of biases, Stats SA strives to minimise such biases.”
Stats SA added that it has not delayed the re-weighting of the CPI.
”This has been part of a structured planning and scheduling process, aimed at producing an improved CPI.
”In view of the importance of the CPI, Stats SA has been careful to ensure that every aspect of the re-weighting and rebasing is treated with utmost care. The result will be a vastly improved CPI in 2009,” it said.
The current CPI is the official CPI, Stats SA added.
”The newly re-weighted CPI will officially come into effect in February 2009, and until the changeover takes place, the existing CPI provides the best measure of price changes that it is currently possible to calculate.”
The agency said it would be ”misleading and confusing” for Stats SA to introduce an interim official inflation rate, an exercise that would probably necessitate the revision of historical index levels in violation of the internationally accepted principle of non-revision in the case of the official CPI. — Sapa