Reply from Department of Statistics, Straits Times Forum 27 Nov 07;
MR RICHARD Seah's letter on the inflation rate of food prices ('5% inflation next year? Food already up 10- 20%'; ST, Nov 20) gives us the opportunity to explain how the Consumer Price Index (CPI) is constructed and how food prices are measured.
The CPI measures the change in price over time of a fixed basket of goods and services that are consumed by households.
In Singapore, the CPI basket comprises seven main groups, namely, Food, Housing, Clothing & Footwear, Transport & Communication, Education & Stationery, Health Care, and Recreation & Others.
The relative importance of these groups in the CPI basket is based on a detailed analysis of the consumption patterns of some 5,400 households covered in the Household Expenditure Survey (HES). The HES is conducted on a regular basis to take into account changes in consumption patterns over time. This basic methodology is in line with international convention.
Food has the highest weight in our CPI basket, at 23 per cent. This means that, on average, a household spends 23 cents out of every dollar on food. Cooked food carries a heavier weight of 13 per cent, compared to 10 per cent for non-cooked food, given the 'Singaporean habit of eating out', as noted by Mr Seah.
It is important to note that the increase in the overall food price index in the CPI represents the average of price movements across various food items and outlets. So while prices of some food items have increased by as much as 10 to 20 per cent at some outlets, there are also items or outlets where prices increased by much less or not at all.
For example, while the price of fresh chicken was 14 per cent higher in October 2007, compared to October 2006, the price of fresh pork went up by just 0.8 per cent during the same period. Likewise, while prices at some hawker stalls had increased substantially, average hawker food prices were up by 2.8 per cent in October 2007, compared to October 2006. Taking into consideration the price movements of all these various items, the overall food index increased by 4.3 per cent in October 2007, compared to a year earlier.
Foo-Wu Wen Chee (Mrs)
Deputy Director
(Consumer Price Index)
Department of Statistics
