Finance

Change in weights resulted in lower Inflation

Karachi, September 4, 2019: The Governing Council of Pakistan Bureau of Statistics (PBS) has approved rebasing mechanism to reflect rural consumption which was earlier being ignored.

As per old methodology, prices of 487 products were collected from 76 markets of 40 cities. Each product has a weight which is multiplied with change in prices to arrive at inflation during the period.

As per new methodology, the base year of inflation would be changed from FY08 to FY16, while weights of certain products are also changed to reflect more realistic consumption pattern of the public.

To note, CPI rebasing activity is conducted after every 10 years which was initially scheduled to be completed by Jun 2017, however due to population census this was delayed by another year to Jun 2018. Again, due to general elections this process was further delayed.

Under the revised base, the bureau will compile Urban Consumer Price Index (UCPI), Rural Consumer Price Index (RCPI) and National Consumer Price Index (NCPI) on monthly basis.

Previously, PBS only compiled Urban Consumer Price Index to determine inflation in the country on monthly basis.

During Aug 2019, based on revised base and weights, Consumer Price Index (CPI) clocked in at 10.49 percent, while based on old weight CPI clocked around 11.63 percent, slightly below our expectations of 11.75 percent.

Restaurants and Hotel has seen largest weight change of 5.7 points to 6.9 percent. While, Housing, water and electricity sector witnessed largest decline of 5.8 points in weight to 23.6 percent.

Miscellaneous category also witnessed increase of 2.1 points followed by clothing and footwear to the extent of 1 points.

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