The Ghana Statistical Service (GSS) has defended its Consumer Price Index (CPI) and Inflation figures, saying the country’s approach to the computation meets internationally recognised standards.
It said United States (US) Professor of Economics, Steve Hanke Purchasing Power Parity (SH-PPP) approach was rather not the conventional mode for computing consumer inflation.
“[The] methodology is not the internationally recognised and accepted standard for computing consumer inflation. A major weakness of the SH-PPP approach is the erosion of country specificities”, the GSS said in a statement.
“Ghana has yielded to the demands for transparency in the production of CPI and inflation, followed scientific and professional standards and ensured country relevance, without compromising international procedures,” it added.
The statement is in reaction to a claim by Prof. Hanke that per his computation using the SH-PPP, Ghana’s inflation for September was 98 per cent instead of the 37.2 per cent announced by the GSS.
However, according to the GSS, there were methodological differences between the two approaches with Ghana’s approach relatively superior to the SH-PPP.
It said the United Nations’ Classification of Individual Consumption According to Purpose (COICOP) 2018 Manual, was one of the international standards that guided Ghana’s computation approach.
GSS explained that it computed consumer inflation based on a fixed basket of goods, such as food and clothing, and services, such as repairs and school fees, which are purchased by households.
The basket, it said had 307 items and their corresponding weights (share of expenditures) while prices were collected on the different brands and service providers of these 307 items leading to approximately 39,500 price quotations collected monthly from 7,726 outlets across the country.
In contrast, the statement said, the SH-PPP proposition for computing consumer inflation mainly relied on the role of exchange rate, as it is used to equate a country’s local currency and the world’s reserve currency, the U.S. dollar.
“Premised on the assumptions and the primary use of exchange rate, the SH-PPP approach is wholly at variance with the approach used in computing CPI and inflation in Ghana,” it said.
On importance of Items, it said the GSS approach, which utilised weights, ensured that the items which made up a larger share of household consumption expenditures, exerted a larger influence on the CPI relative to those that had smaller shares.
However, it said, the SH-PPP approach did not collect data on prices (only uses exchange rate data) and does not take expenditure weights into account.
On disaggregation, it said the GSS releases monthly inflation figures at the regional level and provides disaggregated rates for food and non-food inflation, and for imported and locally produced items.
But the SH-PPP approach was not able to disaggregate data particularly at the geographic level as it does not involve data collection from markets.
“When it comes to exhaustiveness, all the important items that are consumed in Ghana are in the basket that GSS uses to compute CPI, but the SH-PPP approach assumes that all goods and services are traded internationally, noting that it is not all the goods and services in Ghana’s CPI fixed basket that are traded internationally,” the GSS, said.
BY KINGSLEY ASARE
