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Business News of Monday, 11 February 2013

Source: GNA

Inflation to reflect changes in household expenditure patterns

The communication sector’s contribution to Ghana's inflation rate has remained relatively constant over the past two years, showing a very low price change of below one per cent.

This means the price level of communication services such as telephone charges (with a weight of 90%), EMS charges (5% weight) and standard postage (5% weight), as captured by the Consumer Price Index for the sector has remained largely unchanged over the period.

Commenting on the sector’s contribution in helping to keep inflation rate down over the past year, Mr Asuo Afram, Head of Pricing, Ghana Statistical Service (GSS), said the communication sector had for the past year been characterized by high competition leading to price cuts by service providers, hence the lower price levels.

The year-on-year inflation rate for December 2012 was 8.8%, down from 9.3% recorded in November the previous month. The non-food group in the CPI basket of which the communication sector belongs to, recorded a year-on-year inflation rate of 11.6%.

Six sub groups recorded a year-on-year inflation rate above the non-food group’s average rate with Transport recording the highest of 20.6% followed by education, 16.5%; and alcoholic beverages, tobacco and narcotics with 15.1%.

In the communications subgroup, inflation was lowest at 0.4% in December. “Communication services' contribution to inflation rate in recent past has been low and at times zero mainly because of the high competition among the service providers resulting in price cuts through various price schemes to attract customers,” Mr Afram explained.

The telecommunication industry for instance, has seen some kind of price war among the six service providers - MTN, Vodafone, Airtel, Tigo, Glo and Expresso, strategically adopting measures to keep their voice and data charges low in order to win more customers.

The percentage contribution of communications to inflation rate from January 2011 to July 2011 was 0.00% throughout. And from August 2011 to July 2012 the percentage inched slightly up at 0.02% until it dropped at 0.01% to remain constant from August 2012 to November 2012.

Other contributions of the December single digit inflation rate were miscellaneous goods and services (14.4%), clothing and footwear (13.6%), furnishing and household equipment (12.7%), recreation and culture (10.4%), health (9.4%); hotels, cafe and restaurants (8.4%); housing, water, electricity, gas and other utilities (7.7%); and food and non-food beverages (3.9%).

The GSS says it will in March this year start using a revised Consumer Price Index (CPI) to calculate inflation to reflect changes in household expenditure patterns over time.

The new CPI index will have 2012 as the base year. The current index uses 2002 as the base year. New weights will be assigned to the commodities to reflect their relative importance in current household consumption.

Transport and communication are among items that will see higher weightings as they now make up a bigger share of household spending than previously.

Non-food items like transportation, communication and health account, for almost 60 percent of goods in the basket.

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