STATISTICS SINGAPORE - Rebasing of the Consumer Price Index ...

Statistics Singapore Newsletter March 2010importance of each item in the CPI basket, asa proportion of household expenditure.The weighting pattern for the 2009-basedCPI was derived from the expenditure valuescollected from the HES 2007/08. Theseexpenditure values were further updated toprice level in 2009, taking into account pricechanges from 2007/08 to 2009. Chart 1presents the weighting pattern for 2004-basedand 2009-based CPI.Housing and food were the two most importantmain groups in the 2009-based CPI basket.Housing share increased from 21 per centin the 2004-based CPI to 25 per cent in the2009-based CPI, reflecting higher expenditureon both rented and owner-occupied housing(OOH). Food was ranked second, despite itsweight declining slightly from 23 per cent in2004-based CPI to 22 per cent in 2009-basedCPI. Within the food group, households spentproportionately less on “non-prepared meals”and more on “prepared meals”.The shares of transport as well as recreation& others fell 1 percentage point each to 16per cent in the 2009-based CPI. The declinein transport share reflected lower weightsfor cars, road tax and public road transport.Lower expenditure on holiday expensesand government levy on domestic maidscontributed to the decline in the weight forrecreation & others.CHART 1CPI WEIGHTING PATTERN, 2004-BASED AND 2009-BASED CPI2004-based2009-based25%23%22%21%17%16%17%16%4%3%5% 5%8%7%5%6%FoodClothing &FootwearHousing Transport CommunicationEducation&StationeryHealth CareRecreation &Others2

Statistics Singapore Newsletter March 2010Compared with the 2004-based CPI, theshare of education & stationery fell from 8per cent to 7 per cent in 2009-based CPI dueto lower weights for personal computers andoverseas university tuition fees. Health careshare went up from 5 per cent in 2004-basedCPI to 6 per cent in the 2009-based CPI asa result of higher expenditure on specializedmedical treatment and dental services aswell as pharmaceutical products and medicalinsurance premiums. Communication retainedits share at 5 per cent in the 2009-based CPI.Expanded Coverage ofItems and OutletsDuring the rebasing exercise, the CPI basketof goods and services as well as the sample ofoutlets were reviewed and updated to reflectcurrent consumption patterns.The goods and services included for pricing inthe CPI are representative of those commonlypurchased by the majority of the households.For the 2009-based CPI, the number ofbrands selected was expanded to 6,500, from5,170 in the 2004-based CPI. Some examplesof new items included were surgical operationand procedures, home medical and nursingservices, budget airfares, bundled packages(fixed-line, mobile and broadband services)and compressed natural gas.The outlets covered in the CPI included awide range of retailers and service providerscommonly patronised by shoppers. The totalnumber of outlets selected for pricing in the2009-based CPI was increased to 4,200, from3,000 outlets in the 2004-based CPI.Methodological ImprovementsMethodological changes were also introducedin the 2009-based CPI, taking into accountrecommendations by the International LabourOrganisation (ILO) and other countries’ bestpractices.(a)Inclusion ofOne-Person HouseholdsThe coverage for the 2009-based CPI wasexpanded to include one-person householdsin the derivation of the weighting pattern.This group of households was includedto reflect its increasing share in the totalresident households.(b) Adopting More Timely PricingIndicator for Owner-OccupiedHousing (OOH) CostsFor the computation of OOH index in thehousing group, DOS has adopted the rentalequivalence approach which measures theshelter cost in terms of the expected rentalthe owner would have to pay if he were atenant of the premise (i.e. imputed rental).In the 2004-based CPI, the Annual Value(AV) was the pricing indicator used to trackchanges in OOH costs as it coincided withthe concept of imputed rental. However, asthe Inland Revenue Authority of Singapore(IRAS) usually reviews AVs of residentialproperties only once a year, changes in rentalscannot be reflected in the monthly CPI in atimely manner. For the 2009-based CPI, rentaldata which are available on a monthly basisfrom IRAS are used as the pricing indicatorfor OOH costs instead. This will enable changesin OOH costs to be reflected in the CPI ona more timely basis.3

Statistics Singapore Newsletter March 2010Revision of the2009 Inflation RateThe 2009 inflation rate had been revised to0.6 per cent based on the 2009-based CPI(Table 1). The rate based on the 2004-basedCPI was 0.2 per cent.TABLE 1PERCENT CHANGE IN CPI,2009 OVER 2008Per CentMain Group 2004-based2009-basedAll Items 0.2 0.6Food 2.3 2.3Clothing & Footwear 1.1 0.8Housing -0.3 1.7Transport -3.6 -3.2Communication 1.6 0.2Education & Stationery 0.3 0.8Health Care 2.9 2.0Recreation & Others -0.1 -0.3All Items lessAccommodation-0.5 -0.5as methodological improvements. Excludingaccommodation costs, the CPI fell by 0.5 percent in 2009, both before and after rebasing.Among the main groups, the CPI for housingin 2009 rose by 1.7 per cent under the2009-based CPI instead of the 0.3 per centdecline under the 2004-based CPI. The use ofmonthly rental data from IRAS instead of AVas a pricing indicator for OOH costs enabledthe 2009-based housing CPI to reflect moretimely the month-to-month changes in OOHcosts, in tandem with the underlying marketrental trend.Other major groups also recorded differencesin inflation rates. Transport and education& stationery registered relatively higherrates under the 2009-based CPI whileclothing & footwear, communication, healthcare and recreation & others experiencedrelatively lower inflation rates under the2009-based CPI.The revised 2009 inflation rate reflectedbetter the price changes experienced bythe households in 2009 as it encompassedmore up-to-date weighting pattern andcomposition of goods and services, as wellConclusionThe CPI has been rebased to base year 2009to reflect more up-to-date weighting patternand composition of goods and services, aswell as methodological improvements.Details on the rebasing of the CPI can be found in the Information Paper on“The Rebasing of the Consumer Price Index (Base Year 2009 = 100)”, available for freedownloading from the SingStat website athttp://www.singstat.gov.sg/pubn/papers/economy/ip-e36.pdf4