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Consumer Price Index (2001=100) - October 2005
Central Statistical Office (CSO)
November 11, 2005

The year on year inflation rate (annual percentage change) for the month of October 2005 as measured by the all items Consumer Price Index (CPI) stood at 411.0 percent, gaining 51.2 percentage points on the September rate of 359.8 percent.

This means that prices as measured by the all items CPI increased by an average of 411.0 percent be-tween October 2004 and October 2005.

• The year-on-year inflation rate is given by the percentage change in the index of the relevant month of the current year compared with the index of the same month in the previous year.
• Food and Non Alcoholic beverages inflation prone to transitory shocks stood at 407.5 percent whilst Non-food inflation stood at 414.7 percent.
• The month on month inflation rate (monthly per-centage change) in October 2005 was 22.4 percent shedding 10.9 percentage points on the September 2005 rate of 33.3 percent.

This means that prices as measured by the all items CPI increased by an average of 22.4 percent from September 2005 to October 2005.

• The month-on-month inflation rate is given by the per-centage change in the index of the relevant month of the current year compared with the index of the previous month in the current year.

The month on month Food and Non Alcoholic Bev-erages inflation stood at 31.2 percent in October 2005. The month on month non-food inflation stood at 18.3 percent shedding 20.2 percentage points on the September 2005 rate of 38.5 percent.

The CPI for the month ending October 2005 stood at 32087.7 compared to 26224.6 in September 2005 and 6279.6 in October 2004.

• The direction and magnitude of the rate of change in year on year inflation for a relevant month depends on how both the numerator and the denominator (the base) change during the same month in the current and the previous year.

The change in average price of the basket from September 2005 to October 2005 was higher (22.4%) as measured by the change in the price in-dex, than the change in average price of the same basket from September 2004 to October 2004 (10.1%). That explains the rise in year on year infla-tion in October 2005.

The new Consumer Price Index
With effect from June 2005, the CSO is publishing the new Consumer Price Index (CPI) with new weights and a new classification in accordance with international guidelines. The shift to a new classifi-cation of Individual Consumption by Purpose (COICOP) has resulted in the increase in the num-ber of sub-groups from 34 to 68 and the number of major groups has increased from 10 to 12.

The number of items in the CPI basket has also been increased from 337 to 428.As a result, the CPI has become more disaggregated. However, in the short term there would be lack of direct comparison of certain sub-indices for which monthly and annual comparison should be achieved in July 2005 and June 2006, respectively.

Due to the reclassification that has been done, some new sub-groups were created by moving individual items from one sub-group to another sub-group. For instance, the major group "Transport and Communication" in the previous classification was split into "Transport" and "Communication" major groups under the new set up. A totally new major group called "Restaurants, Cafes and Hotels" was created.

The implementation of the COICOP classification is also part of the harmonisation project of Con-sumer Price Indices in different regions like the SADC region. All member states are supposed to adopt the new procedure to enable inter country comparisons of the CPI and the rate of inflation.

The indices prior to June 2005 were all re-referenced to 2001=100. In principle, these indices do not aggregate. However, the rates of inflation remain the same under different weight regimes as the relative magnitude of indices is maintained. The new weights are therefore applicable from June 2005 onwards.

Linking the 1995=100 with the 2001=100 base at all items level
Users who wish to continue using the old series (the 1995=100 base) are advised to divide the current all items index with a new base of (2001=100) by a conversion factor of 0.12384622. For instance if the CSO had continued with the old base (1995=100), the June 2005 all items CPI was going to be 99 754.35.For instance the July 2005 CPI at 1995 prices is 146599.5.

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