Statistics agency plans to update inflation basis

Statistics agency plans to update inflation basis

JAKARTA (JP): The Central Bureau of Statistics plans next year
to modify the base for calculating the consumer price index (CPI)
in a bid to ensure a more representative inflation figure, says
the agency's chairman Soegito.

Soegito said the change in the system in calculating the CPI,
the base used in measuring the inflation rate, would be made to
comply with the change in people's consumption patterns.

"The increase in the per capita income and the rise in the
population have resulted in a significant expansion in the
people's consumption patterns," he said.

The CPI for Indonesia, which is actually the weighted average
of CPIs at provincial capitals, uses the total number of
households in each city as the weights.

The existing system in calculating the CPI is based on prices
of 224 items of consumer goods and services in 27 provincial
cities including Dili, the capital of East Timor.

Economists, however, said that the existing system no longer
ensures a more objective inflation figure, given the rapid change
in the per capita income and consumption patterns taking place in
the last five years.

Rijanto, a noted monetary expert, charged recently that the
inflation figure provided by the government does not really imply
the actual fluctuation rates as most of the components used in
calculating the CPI no longer indicate the real price movements.

Soegito said that in the planned system, components of goods
and services, which will be used in determining the CPI, would be
expanded to between 300 and 400 in order to ensure a more
representative inflation figure.

Indonesia has been able to maintain its inflation rate below
10 percent in the last three years as the impact of its tight
monetary system.

But economists said that the inflation rates do not reflect
the real price movements because the existing base in calculating
the price index mostly covers less important items of consumer
goods.

They said if the base in calculating the CPI fully reflected
the real price fluctuation, the inflation figure should have been
higher than 10 percent. (hen)