COMPARISON OF CONSUMER PRICE INDEX BASKET BETWEEN CURRENT

BASE YEAR AND NEW BASE YEAR IN MYANMAR

By

Nyaung Tai

A call paper submitted in Requirement for ESCAP

Asia-Pacific Economic Statistics Week Seminar Component

Bangkok, 2 – 4 May 2016

at the Central Statistical Organization (CSO)

5 April 2016

ii

CONTENTS

CONTENTS................................................................................................................... ii

LIST OF TABLES.......................................................................................................... iii

LIST OF TABLES.......................................................................................................... iv

ACRONYMS................................................................................................................... v

ABSTRACT................................................................................................................... vi

Chapter 1 INTRODUCTION........................................................................................ 1

1.1 Background……………………………………………………………. . 1

1.2 Objectives of the Study………………………………………………. 1

1.3 Organization of the Study……………………………………………. 2

Chapter 2 LITERATURE REVIEW…………………………………………………….. 3

2.1 Concepts and definition………………………………………………. 4

2.1.1

Consumer Price Index (CPI)………………………………. 4

2.1.2 Inflation……………………………………………………… 5

2.1.3 CPI Scope and Weights…………………………………… 6

2.1.4 CPI basket and Classification…………………………….. 7

Chapter 3 DATA AND METHODOLOGY…………………………………………….. 9

3.1 Regional Data…………………………………………………………. 9

3.2 Selecting Commodities and Outlets………………………………… 10

3.3 Price Collection………………………………………………………. 10

3.4 CPI Weighting Pattern……………………………………………….. 11

3.5 Compilation Method………………………………………………….. 13

Chapter 4 DISCUSSION………………………………………...……………………… 16

4.1 Consumer Price Index and Inflation………………………………... 16

Chapter 5 CONCLUSION AND RECOMMENDATIONS…………………………… 20

5.1 Conclusion................................................................................... 20

5.2 Recommendations…………………………………………………. 20

References………………………………………………………………………………… 21

iii

LIST OF TABLES

Table 2.1 Comparison of weights between 2006 base year and 2012 base year……. 6

Table 2.2 Comparison of CPI basket between 2006 base year and 2012base year... 8

Table 3.1 Components and weights of the CPI basket…………………………………… 11

Table 3.2 Differences method between current CPI and new CPI……………………. 14

Table 4.1 Comparison of CPI& Inflation between 2006 current base year and 2012

new base year……………………………………………………………………. 16

Table 4.2 Comparison of monthly CPI& Inflation between current base year and new

base year of 2015………………………………………………………………… 17

Table 4.3 Base year comparison within ASEAN Countries ……………………………. 19

LIST OF FIGURES

iv

Figure 4.1 Comparison of monthly CPI& Inflation between current base year and

new base year of 2015……………………………………………………….. 18

ACRONYMS

ASEAN Association of South East Asian Nations

CES Consumer Expenditure Survey

COICOP Classification of Individual Consumption according to Purpose

v

CPI Consumer Price Index

CSO Central Statistical Organization

FPI Fisher Price Index

HIES Household Income and Expenditure Survey

LPI Laspeyres’ Price Index

MNPED Ministry of National Planning and Economic Development

PPI Paasche Price Index

RAP Ratio of Arithmetic Mean Prices

Abstract

This paper studies the comparison of Consumer Price Index (CPI) basket between current base year and new base year. The Central Statistical Organization (CSO) is collecting the prices of selected commodities (158) items for computing states/regions and union levels of CPI with Laspeyres’ Price Index (LPI) formula on the 2006 base year that is using simple average method. The selected commodities includes (83) food items and (75) non-food items are taken as representative consumer market basket items from Household Income and Expenditure Survey (HIES) that used stratified three stages random sampling and collected data on commodities and services (436) items from 32000 households of 80 townships in December 2006. CPI 2006 base year covered for only urban household. CSO

vi

is trying improving CPI to change new 2012 base year that consists of selected commodities (274) items from 32669 households in 82 townships of HIES by using Classification of Individual Consumption according to Purpose (COICOP), the standard international classification as well as present classification of items adopted in the existing CPI numbers compiled at both of urban and rural level. New CPI base year will be used Modified Laspeyres’ Price Index. The selected commodities are food (108) and non-food (166) to compute CPI by using geometric mean method. In the market economy, prices are basically determined by forces of supply and demand. As price have influence on the behavior of the economy, and impact on the real income of the people, a number of price indexes are constructed and used in economic analysis. It shows the changes in prices of specific consumer items in a representative consumer market basket related to a base period which represents a fairly normal period insofar as possible. Key words: Laspeyres Price Index, Modified Laspeyres’ Price Index, Simple Average Method, Geometric Mean Method, Improving CPI, Inflation

1

CHAPTER 1

INTRODUCTION

1.1 Background

The world is enjoying the fruits of modern technology in many ways which are based on

the quality of statistics for economic sector. Economic statistics is very important for a country.

The statistics indicates the real economic conditions of a country and economic statistics (or)

indicators are showing how much economic growth can be reflected on people of the country.

Myanmar has been moving towards a free market-oriented economy, since late 1988. In

the market economy, prices are basically determined by forces of supply and demand. As prices

have influence on the behavior of the economy and impact on the real income of the people, a

number of price indexes are constructed and used in economic analysis. Among them, CPI is a

widely referred one that draws the attention of policy-makers, decision-makers, entrepreneurs

and investors and which also concerns the general public. It shows the changes in prices of

specific consumer items in a representative consumer market basket related to a base period.

The CSO had used differing years such as 1958, 1965,1972,1978,1986, 1997 as the

base period in CPI computation over time. CPI measures changing of prices based on nation-

wide HIES which conducted once in five years. CPI is used as a principal measure of Inflation in

Myanmar. CPI and Inflation are key economic indicators; CSO computes monthly CPI for the

users at varied levels, i.e., union, regions/states and cities and submits the findings to the higher

authorities for necessary action, within a week from the end of month reported.

1.2. Objectives of the study

HIES survey uses to conduct for using CPI base year. CSO is now using 2006 base year

for computing CPI based on HIES which was conducted in December 2006. When conducting

the 2006 HIES, sampling frame drown out form administrative records released by Ministry of

Home Affair. In this survey, three stages stratified random sampling had used. These were as

2

follows: 1st stage for townships, 2nd stage for wards and village tracks and 3rd stage for

households. In this survey, 32000 households in 80 townships were monitored.

When compiling the CPI 2006-based, Union price is a weighted average price of these

80 townships. The fluctuation of CPI depends on its weight and prices. In 2006-based, there are

only 158 commodities including 83 food items and 73 goods and services, and the commodities

are mostly domestic products. Therefore, Items lists are out of date and it is need to repair

modernized. Moreover, the order of item does not in line with the COICOP and it can’t compare

with the statistics of international agencies. Above mentioned problems, CSO need to change

the new CPI base-year. As the objectives of this paper, 3 parts are shown as follows;

(1) To overcome the problems of 2006 base CPI

(2) To standardize in line with international level

(3) To reflect the current situation consumption

1.3. Organization of the study

This paper consists of five chapters. The first chapter comprises introduction,

background, objectives, and paper organization. Chapter 2 describes literature review, which

states previous empirical evidence of compilation of the CPI in a country. Chapter 3 explains

using data and methodology. Chapter 4 shows discussion of the results. Finally, Chapter 5

concludes the paper by showing the comparison result of the 2006 base year and 2012 new

base year in Myanmar.

3

CHAPTER 2

LITERATURE REVIEW

The price section of CSO under the Ministry of National Planning and Economic

Development (MNPED) is collecting, compiling, computing, and dissemination the price of

selected commodities for states/regions, and Union levels of CPI and Inflation. The price section

has been summiting daily CPI for Yangon, Naypyitaw (Pyimana, Lawei, and Tatkone), gold

prices and US $ value to higher Authority. And also, 15 states/ regions, Yangon City, Mandalay

City, and Naypyitaw Council of CPI and inflation for weekly, monthly, and yearly are presented.

Price section has been using 2006 base year to computing CPI with LPI formula. CPI basket

weights based on HIES, 2006 December. In “Base Year Revision of Consumer Price Index

(CPI)”, Republic of India Ministry of Statistics and Programme Implementation (2015) writes that

the base year of this series of CPI is 2010=100 and weighting diagrams are based on the

results of Consumer Expenditure Survey (CES) 2004-05.

Current commodities’ price reflects on individual consumption by households. Changes

in price level of goods and services in Myanmar that most people buy for their day-to-day

consumption. Therefore, our CPI baskets need to reflect the consuming of Myanmar’s

households. New CPI with a base year of 2012 will meet with our needs. CSO is now working

on an updated consumer price index to measure retail inflation that would have a lesser

weighted for food prices. Veronica & Irene (2010) showed that the rate of change in the CPI,

which captures the changes in the characteristic Filipino household cost of living based on the

movements of the prices of items in the basket of goods and services consumed.

The current base year is using CPI basket (158) items in accordant with Myanmar

consumption pattern in 2006. CSO is now trying improving CPI that is to change new 2012 base

year with COICOP that consists of (12) heading group. The international standard classification

of COICOP that is being followed the geometric mean, instead of arithmetic mean being used in

4

the old series, of the price relatives with respect to base prices would be used to collect CPI

basket item (Republic of India Ministry of Statistics and Programme Implementation,2015).

2.1. Concepts and definition

2.1.1 Consumer Price Index (CPI)

The CPI represents prices paid by consumers or households. Prices for a basket of

goods are compiled for a certain base period. Price data for the same basket of goods is then

collected on a monthly basis. This data is used to compare the prices for a particular month with

the prices from a different time period. The CPI measures the average change in the retail price

of goods and service purchased and consumed overtime.

CPI can calculate the following of formulas are:

P1i =Price of item i in the current period

P0i =Price of item i in the base period

Q1i = Quantity of item i in the current period

Q0i = Quantity of item i in the base period

n = Total items

Σ = Sum n term of multiply quantity and price

LPI = Laspeyres’ Price Index

5

PPI = Paasche Price Index

iPt = Price of item i in comparison period t

iP0 = Price of item i in comparison period 0

iw0 = Expenditure on item i in base period 0, divided by expenditures on all items in

base period 0

iwt = Expenditure on item i in comparison period t, divided by expenditures on all items

in comparison period t

∏ = Indicates the product operator

2.1.2 Inflation

The Inflation can be measured by computing percent change in current month CPI from

month to month or percent change from the same month of the prior year; however such

computation may produce misleading rate should the months under study happen to be extreme

period showing sharp fall or rise in prices. Therefore, annual rate of inflation is computed by

taking 12 month of year, according to the following formula:

bi = CPI for the current period

ai = CPI for the corresponding month of the previous year

2.1.3 CPI scope and weights

The current CPI covers the consumption of urban households of Myanmar and is based

on the HIES 2006 reflecting December average consumption. The new CPI 2012-based will

6

cover both urban and rural private household consumption based on the HIES 2012. The

December average consumption per urban and rural households was used to derive total

consumption of all households in the regions/states. As total expenditure was measured in

December 2012 with prices of that period, the weights were price-updated to current price level

using the current indices. For new products; the index of a link product was used to proxy the

price change of the new product. The regions/states level consumptions were used to receive

the total union consumption. Table (2.1) presents the comparison of weights between 2006

base year and 2012 base year, which have food items in the higher weights than other items.

Table 2.1 Comparison of weights between 2006 base year and 2012 base year

Code No. Items Group 2006=100 2012=100

01 Food And Non-Alcoholic Beverages 62.32 58.51

02 Alcoholic Beverages, Tobacco 2.14 1.65

03 Clothing And Footwear 1.82 3.23

04 Housing, Water, Electricity, Gas And Other Fuels 9.70 8.07

05 Furnishings, Household Equipment And Routine

Household Maintenance 1.92 2.34

06 Health 1.59 2.13

07 Transport 7.91 10.13

08 Communication

1.62

09 Recreation And Culture 0.88 1.02

10 Education 1.67 2.15

11 Restaurants And Hotels 5.67 5.95

12 Miscellaneous Goods And Services 4.40 3.21

Source: Price Section, CSO

7

2.1.4 CPI basket and classification

The new CPI introduces the UN COICOP classification. The classification is used

internationally and makes it possible to make international comparison of inflation on more

detailed level. The current CPI includes 158 products and services, 83 food items and 75 non-

food items. The new CPI has 274 products and services, 108 food items, 166 non-food items

including goods and services. There are new 116 items in the index, for example new and used

cars, mobile phones and mobile phone charges and computers…etc. When constructing the

CPI 2006-based, both of purchased and non-purchased items are included. But in 2012-based,

non-purchased items are excluded from total expenditure. In table (2.2) there is a comparison of

weights between 2006 base year and 2012 base year.

8

Table 2.2 Comparison of CPI basket between 2006 base year and 2012 base year

Sr.no

2006=100 2012=100

Commodity Group

No. of Consumer

items

Commodity Group

No. of Consumer

items

I Food 83 Food 108

1. Rice 1

1. Food and Non-Alcoholic

Beverages 108

2. Oils 4

3. Meat, Fish& Eggs 25

4. Others 53

II Non-Food 75 Non-Food

166

1. Clothing and

apparel 15 1.

Alcoholic beverages,

Tobacco 12

2. House rent and

repairs 8 2. Clothing and Footwear 21

3. Fuel and Light 10 3. Housing, Water, Electricity,

Gas and Other Fuels 19

4. Miscellaneous

Goods 42 4.

Furnishings, Household

Equipment And Routine

Household Maintenance

32

(a) Education (8) 5. Health 10

(b) Medicine (5) 6. Transport 18

(c) Conveyance (9) 7. Communication 3

(d) Cleansing and

Toilet (8) 8. Recreation And Culture 13

(e) Other (12) 9. Education 2

10. Restaurants And Hotels

15

11. Miscellaneous Goods And

Services 21

Total 158 274

Source: Price Section, CSO

9

CHAPTER 3

DATA AND METHODOLOGY

3.1. Regional Data

In the current CPI the indices are compiled in township level. And also, CSO is

computing CPI and Inflation for union, states and region levels. The new CPI will be compiled in

states/regions level and 3 major cities (Yangon, Mandalay and Naypyitaw) and Union level. The

Yangon, Mandalay and Naypyitaw region indices are compiled excluding the cities. Therefore,

union level consists of states/regions (15) and (3) major cities, which are total of (18) townships.

3.2 Selecting Commodity and Outlets

In selecting the items as CPI basket, it depends on consumption of households that

spend more on some items and less on the others. A total of 274 varieties are included in the

CPI basket, 108 items for food and 166 items for non-food including goods and services. They

are classified into 12 main divisions based widely on the COICOP. In the CPI 2012 base, some

new products come to include which were not included in 2006-based such as automobile,

motorcycle, computer, cell phone, call charges etc. Outlets were chosen depend on total

number of households within a township. Total outlets, therefore, among the cities were not

same. The total number of outlets selected for pricing is 258 and observation prices are about

70,692.

3.3 Price Collection

The current CPI prices are collected on a weekly basis from 80 townships, 4 outlets in

each township. The weekly average price of township is calculated. Average price of state is

receives as an average of these township averages. Also the union level average price is

calculated as non-weighted average of township averages. The upper level index is then

achieved as weighted average of these lower level averages of averages.

10

In the new CPI prices will be collected from 82 townships. Number of outlets in one

township depends on the number of households in the township. In biggest townships, there are

7 outlets and in the smallest townships there is 1 outlet. The prices will be collected only once a

month/outlet, but in region/state level all weeks of the month are covered.

Individual outlet the prices are collected at the same week of the month. In total there

are 258 outlets in the sample. For homogenous products, e.g. Rice Emata, only one price per

outlet is collected, for more heterogeneous product, e.g. Mobile phones, two to three prices per

outlet is collected. Some prices that are same in the whole union, e.g. electricity, are centrally

collected and the same index is used for all states/regions.

3.4 CPI Weighting Pattern

In compilation of the CPI, weights are required to reflect the relative importance of each

item in the basket, that is, their share as a proportion of total household expenditure. In driving

the CPI weight, 15 states and regional and 3 major cities were compiled, and Yangon,

Mandalay and Naypyitaw region weight were constructed excluding the cities. Weights of Union,

state and regional level are shown in Table (3.1).

Table 3.1 Components and weights of the CPI basket

Component Weight Union Kachin State

Kayah State

Kayin State

Chin State

All Item Food and Non-Alcoholic Beverages 58.51 64.12 57.38 58.83 65.56 Alcoholic Beverages, Tobacco 1.65 1.16 3.86 2.43 1.20 Clothing and Footwear 3.23 2.93 4.60 4.14 3.67 Housing, Water, Electricity, Gas and Other Fuel 8.07 7.34 7.19 5.78 9.60 Furnishing, Household Equipment, 2.34 2.27 4.10 2.61 2.41 and Routing Household Maintenance Health 2.13 2.35 2.04 2.32 3.95 Transport 10.13 9.04 9.93 9.16 4.79 Communication 1.62 1.02 1.69 1.21 1.02 Recreation and Culture 1.02 0.92 0.92 1.04 0.87 Education 2.15 2.28 1.78 2.20 1.20 Restaurants and Hotels 5.95 3.62 3.28 6.03 2.96 Miscellaneous Goods and Services 3.21 2.95 3.23 4.26 2.78

Source: Price Section, CSO

11

Table 3.1 Components and weights of the CPI basket Cont.’s

Component Weight

Saging Region

Tanintharyi Region

Bago Region

Magwe Region

Mandalay Region

All Item Food and Non-Alcoholic Beverages 61.55 54.24 59.46 61.21 59.91 Alcoholic Beverages, Tobacco 1.37 3.31 1.66 2.19 1.26 Clothing and Footwear 3.16 2.65 4.12 2.46 3.06 Housing, Water, Electricity, Gas and Other Fuel 5.79 10.92 8.15 6.93 5.95 Furnishing, Household Equipment, and Routing Household Maintenance 2.69 1.35 2.29 2.67 2.05 Health 1.96 1.94 2.56 2.20 1.69 Transport 11.15 12.00 8.77 7.58 12.40 Communication 0.96 1.85 1.15 1.35 1.34 Recreation and Culture 1.15 1.58 1.21 0.81 0.86 Education 2.13 1.19 1.86 1.98 2.19 Restaurants and Hotels 4.44 5.76 5.86 7.39 6.35 Miscellaneous Goods and Services 3.65 3.21 2.91 3.21 2.93

Component Weight

Mon State

Rakhine State

Yangon Region

Shan State

Arawaddy Region

All Item Food and Non-Alcoholic Beverages 58.18 59.05 54.64 59.63 57.91 Alcoholic Beverages, Tobacco 1.13 4.21 1.28 1.76 2.15 Clothing and Footwear 3.55 2.97 3.22 3.38 3.74 Housing, Water, Electricity, Gas and Other Fuel 9.18 9.99 8.61 8.67 11.20 Furnishing, Household Equipment, and Routing Household Maintenance 1.65 2.72 2.48 2.50 2.69 Health 2.86 1.37 2.56 1.59 1.76 Transport 7.05 4.25 10.48 11.74 8.14 Communication 1.61 1.12 2.50 1.85 1.47 Recreation and Culture 0.86 1.04 0.95 1.09 0.82 Education 2.73 2.34 2.12 2.16 1.60 Restaurants and Hotels 7.83 7.39 7.73 2.92 4.57 Miscellaneous Goods and Services 3.36 3.54 3.42 2.70 3.95

Source: Price Section, CSO

Source: Price Section, CSO

Component Weight

Naypyitaw Region

Yangon City

Mandalay City

Naypyitaw City

All Item Food and Non-Alcoholic Beverages 57.52 54.32 52.65 54.12 Alcoholic Beverages, Tobacco 1.21 0.60 0.32 1.16 Clothing and Footwear 4.50 2.48 2.64 3.63 Housing, Water, Electricity, Gas and Other Fuel 7.76 8.90 5.83 7.20 Furnishing, Household Equipment, 3.08 1.97 1.06 2.67 and Routing Household Maintenance 2.85 2.68 1.20 3.35 Health 10.33 11.31 21.89 11.19 Transport 1.67 2.75 2.09 2.86 Communication 0.54 1.29 1.05 0.63 Recreation and Culture 2.30 2.77 2.43 3.13 Education 5.38 8.19 6.81 6.04 Restaurants and Hotels 2.86 2.74 2.02 4.01 Miscellaneous Goods and Services

57.52 54.32 52.65 54.12

Source: Price Section, CSO

12

3.5 Compilation Method

The current 2006 base year has been computing CPI by using the following Laspeyres’s

formula:

P1i = Price of item i in the current period

P0i = Price of item i in the base period

Q1i = Quantity of item i in the current period

Q0i = Quantity of item i in the base period

n = Total items

Σ = Sum n term of multiply quantity and price

The international agencies are using geometric mean to compute CPI. But, Myanmar is

using Arithmetic mean/Simple Average Method for computing CPI. Therefore, CSO is trying to

change improving CPI by using geometric mean according to international standard of the

COICOP.

In the new index at the micro-level (one product in one region) a geometric mean of

price changes from previous month is calculated. The index for current month is received by

multiplying the previous month index with this change. The new 2012 base year will be

computing CPI by using the following Modified Laspeyres’s formula:

𝐼𝑡𝑖 = 𝐼𝑡−1

𝑖 ∗ √𝜋𝑝𝑡𝑖

𝑝𝑡−1𝑖

𝑖, where

𝐼𝑡𝑖 is an index of product i in month t,

𝐼𝑡−1𝑖 is an index of product i in month t-1,

𝑝𝑡𝑖 is price of product i in month t and

𝑝𝑡−1𝑖 is price of product i in month t-1

13

To receive the upper level indices and the Union index, the weighted average of these

micro-level indices calculated.

𝐼𝑡 = ∑ 𝑤𝑜𝑖 ∗ 𝐼𝑡

𝑖𝑖 , where

𝐼𝑡 is index for month t and

𝑤𝑜𝑖 is weight of product i in base period 𝑤0

𝑖 =𝑝0𝑖 ∗𝑞0

𝑖

𝑝0∗𝑞0.

Table (3.2) shows that differences method between current CPI 2006 base year and

new CPI 2012 base year. Current CPI need to change improving method and methodology to

develop computing new CPI by using international standard.

Table (3.2) Differences method between current CPI & new CPI

Current 2006 Base Year

New 2012 Base Year

Total items are 158 Total items are 274

Food items are 83 Food items are 108

Non Food items are 75 Non Food items are 166

32000 households in 80 townships 32669 households in 82 townships

Using simple average/ratio of arithmetic mean prices method

Will be used geometric mean method

Only urban HHs covered Both of urban and rural HHs will be covered

Laspeyres’ price index Modified Laspeyres’ price index

It Will be used COICOP

Source: Price Section, CSO

14

CSO is computing the union level of current CPI 2006 base year by fixed choosing of the

(158) items. Although, the new CPI 2012 base year is based on the expenditure of states/

regions, which is identified biggest or smallest of the expenditure for townships. Therefore, each

of townships cannot be same CPI basket for collecting items.

In Myanmar, there is also interest on average prices. In the current average prices are

calculated as mentioned above in the index methodology part. In new production system, the

average prices will be calculated on the regional level. The union level average price will be the

weighted average of these averages. The same weights are used as in the CPI calculation.

15

CHAPTER 4

DISCUSSION

4.1 Consumer Price Index and Inflation

Table 4.1 presents the comparison of the CPI and inflation between 2006 current base

year and 2012 new base year. This table results show that the new 2012 base year is lower

than the current 2006 base year for computing CPI and inflation. The reason of the different

results appeared the higher gap CPI baskets between the current and new base year, changing

weights, adding new goods and service, and using arithmetic mean to geometric mean for

computing average price of CPI and inflation.

Table 4.1 Comparison of the CPI and Inflation between 2006 current base year and 2012

new base year

Particular Base Year

2010-

2011

2011-

2012

2012-

2013

2013-

2014

2014-

2015

CPI

2006 =100 158.93 163.32 167.94 177.53 188.02

2012 =100

102.29 105.74

Annual rate of inflation

2006 =100 8.22 2.82 2.85 5.72 5.90

2012 =100

4.88 3.38

Year on Year inflation

2006 =100 8.88 -1.09 4.72 6.26 7.45

2012 =100 4.63 5.99

Source: Price Section, CSO

According to the geometric mean results, CPI was 102.29 and Inflation was 4.88 % for

2013-2014. In 2014-2015, CPI was 105.74 and Inflation was 3.38 %. The CPI of fiscal year of

16

2014-2015 is higher than CPI fiscal year of 2013-2014. But, 2014-2015 fiscal year of inflation

lower than 2013-2014 of inflation. Because of the commodities’ price was not factual rising and

falling for 2013-2014 fiscal years. That’s why; the growth rate of CPI is very high.

Table 4.2 Comparison of monthly CPI &inflation between current base year and new base

year of 2014

Month

CPI Inflation

2006 Base Year 2012 Base Year 2006 Base Year 2012 Base Year

JAN 179.24 106.63 4.90 4.58

FEB 179.42 106.76 6.03 5.71

MAR 180.04 107.06 6.26 6.30

APR 181.65 107.88 5.96 5.97

MAY 183.45 109.04 6.08 5.85

JUN 184.71 109.46 5.96 5.52

JUL 185.47 109.83 5.22 5.33

AUG 185.98 110.14 4.17 4.13

SEP 186.04 110.07 3.98 3.59

OCT 186.64 110.16 4.00 3.70

NOV 191.15 111.06 6.15 3.93

DEC 192.45 112.17 7.06 4.97

Source: Price Section, CSO

17

Figure 4.1 Comparison of monthly CPI &inflation between current base year and new

base year of 2014

Source: Price Section, CSO

The comparison of monthly CPI & inflation between current base and new base for 2015

in Table 4.2 and Figure 4.1, that shows current 2006 base year is higher than new 2012 base

year of inflation with monthly. Because of a much of commodities were widely used in new CPI

which is reflected on current consumption pattern. Otherwise, 2012-based CPI basket has 274

items that of much more than 2006-based 158 items. That’s why, the CPI and Inflation of new

2012 base year is lower than that of current CPI and inflation.

0

1

2

3

4

5

6

7

8

0

50

100

150

200

250

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

CPI 2006 Base Year CPI 2012 Base Year

Inflation 2006 Base Year Inflation 2012 Base Year

Comparison of monthly CPI &inflation between

2006 base year and 2012 base year of 2014

18

Table 4.3 Base Year Comparison within ASEAN Countries

Sr. Country Base Year

1 Singapore 2014

2 Thailand 2011

3 Myanmar 2006

4 Philippine 2006

5 Malaysia 2010

6 Cambodia 2010

7 Indonesia 2010

8 Laos 2010

9 Brunei 2010

10 Vietnam 2010

Source: ASEAN Statistical Year Book

Table (4.3) presents base year comparison within ASEAN countries for computing CPI.

The different base year of the ASEAN countries are using that Singapore (2014), Thailand

(2011), Malaysia, Cambodia, Indonesia, Laos, Brunei, and Laos (2010), and Philippine and

Myanmar (2006) for computing CPI. In the world, most of countries are trying to change

improving CPI with new base year for reflecting of the current situation of the households.

19

CHAPTER 5

CONCLUSION AND RECOMMODITION

5.1 Conclusion

CSO has been undergoing to change the CPI, which is gauge in Myanmar, base year

from 2006 to 2012. It will help the available consumption patterns across nation-wide, and for

non-food subgroup titles, the weight was significantly increased up to 41.49 % compare with

that of 37.68% in 2006 base. CPI, which tracks inflation at the consumer level, has become the

key measure of inflation for Central Bank of Myanmar (CBM) to decide on monetary policy

action. United Nation (2009) reported that CPI is widely scope, which has used macroeconomic

indicator of inflation that has been targeting and monitoring to stable price, and as deflators in

the national accounts by governments and central banks. Price section has been doing exercise

of the new CPI pattern with IMF expert, who had come to CSO of Myanmar seven times.

According to experts, the revision of base year will have a marginal impact on the index. The

methodology of calculating inflation will also see a change from the present average method to

geometric mean, which will take care of a particular category driving the entire index, an

internationally accepted practice. The CPI basket includes items for which more than 75%

households have reported consumption.

In 2006-based CPI, the key problem of the index methodology is using unweighted

average of Township prices to calculate states/regions and union level indexes are incorrect.

The states/regions level indexes to be consistent with the Township indexes require weighting.

Although average prices at Township level acceptable, a focus on deriving comparable average

prices over time results in sub-optimal indexes. The current base year has too few varieties

priced (generally only one for each item) and too few outlets (usually only one in each

Township).

The new CPI measures more data. The current CPI 2006 base year listed one index for

each of the five pricing categories (food, fuel, clothing, housing, and miscellaneous). The new

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CPI, however, includes more data within each of the five categories. For example, the

“miscellaneous” category now includes subcategories of: education, medical care, recreation,

transportation, personal care, and household requisites. In addition, the new CPI provides an

index for each of the 15 Myanmar states/regions as well as a general “All Myanmar” index.

Therefore we hope the new CPI 2012-based would be much more reliable than the old one, and

this breakdown allows for greater precision and transparency in measuring price changes in the

Myanmar economy.

5.2 RECOMMENDATIONS

The government will be able to change reflecting CPI basket items, to use updating

HIES survey base year, and to follow the international standard of the CPI calculation to

improve economic statistics. The previous empirical evidence provided with this study not only

contributes to the literature to support the condition of the CPI in country, but also provides

information on policy makers in Myanmar upon which to analyse economic sector by

consumption pattern.

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REREFENCES

[1] Republicof India Ministry of Statistics and Programme Implementation (2015). “Base Year Revision of Consumer Price Index (CPI).” Available from www.govtempdiary.com/2015/01/base.../baseyearrevision22jan15 [2] United Nations. 2009. “Practical Guide to Producing Consumer Price Indices.” New York and Geneva. [3] Veronica, B., & Irene, T. 2010. “A Geometric Price Index for the Philippines: A Preliminary Assessment.” BSP Working Paper Series 10(01).