REFERENCE is made to a letter by Mr. GHK Lall (chief opinionist), in the Stabroek News edition of September 3, 2024, with the caption “that 1.6 per cent CPI stat that flies in the face of every market experience by many Guyanese”.
Only recently this author dedicated a technical article explaining and demonstrating how to correctly interpret and analyse the Consumer Price Index (CPI). In the case of GHK’s contentions, the supposedly CFA trained financial analyst, his interpretation of the index was fundamentally flawed and incorrect.
The overall index showed an increase by 1.6 per cent as of June 2024, when compared to the end of year position for 2023. However, the better comparison ought to be the corresponding half-year period (2023) with the corresponding half year period (2024).
In this case, the CPI reflected an increase of 4 per cent. In other words, the inflation rate for the half year period June 2024, when compared to the corresponding period in 2023, was 4 per cent .
Moreover, GHK went onto to argue that the 1.6 per cent cannot be accurate after which he sought to demonstrate by his juxtaposition of that argument with the rise in food prices. But GHK failed to appreciate and/or demonstrate that the CPI is made up of several sub-categories.
As shown in the table above, food prices have increased by almost eight per cent when compared to the corresponding half-year period in June 2023. Conversely, footwear and repairs, clothing, housing, furniture, transport, and communication have not recorded any increases. Thus, this explains the reason why the overall index has a lower percentage change as opposed to the sub-categories, such as food prices, accounting for the largest increase in the CPI.
One can also easily relate as to why housing, transport and communication did not experience increase in prices. This outturn is on account of deliberate government intervention and public policies. Housing, for example, is a sector that is heavily incentivised in multiple ways, including interest free loans to first-time, low-income home owners.
In the telecommunications industry, prices have actually fallen due to the government’s liberalisation of the sector, thereby ramping up competition and enabling new entrants into the market, inter alia, stimulating competition. Additionally, VAT on data and other electronic supplies for mobile devices have been removed.
Similarly, in the public transportation sector, the government has heavily subsidised fuel cost by waiving the 50 per cent excise tax on fuel imports. Altogether, the removal of this tax amounted to a country wide fuel subsidy of over $80 billion annually. Hence, the reason why transportation prices have not shown any increases over this period.