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Consumer Price Index - September 2005
Central Statistical Office (CSO)
October 18, 2005

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The year on year inflation rate (annual percentage change) for the month of September 2005 as meas-ured by the all items Consumer Price Index (CPI) stood at 359.8 percent, gaining 94.7 percentage points on the August rate of 265.1 percent.

This means that prices as measured by the all items CPI increased by an average of 359.8 percent be-tween September 2004 and September 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 308.2 percent whilst Non-food inflation stood at 391.4 percent.

The month on month inflation rate (monthly per-centage change) in September 2005 was 33.3 per-cent gaining 25.0 percentage points on the August 2005 rate of 8.3 percent.

This means that prices as measured by the all items CPI increased by an average of 33.3 percent from August 2005 to September 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 23.3 percent in September 2005. The month on month non-food inflation stood at 38.5 percent gaining 31.7 percentage points on the August 2005 rate of 6.8 percent.

The CPI for the month ending September 2005 stood at 26224.6 compared to 19666.7 in August 2005 and 5702.9 in September 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 August 2005 to September 2005 was higher (33.3%) as measured by the change in the price index, than the change in average price of the same basket from August 2004 to September 2004 (5.9%). That ex-plains the rise in year on year inflation in September 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 con-version 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 in-stance the July 2005 CPI at 1995 prices is 146599.5.

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