Inflation At Different Income Levels: Why Can’t We Do This?

Kenya does it; India does it; Singapore does it (warning: pdf link):

SINGAPORE CONSUMER PRICE INDEX FOR HOUSEHOLDS IN DIFFERENT INCOME GROUPS

Consumer Price Index, July – December 2013

During the second half of 2013, the consumer price index (CPI) for general households rose by 1.9 per cent over the same period in 2012. This increase was lower than the 2.8 per cent recorded in the first half of 2013. A similar trend was observed for CPI excluding imputed rentals on owner-occupied accommodation (OOA), which rose by 1.5 per cent, down from the 2.2 per cent in the first half of 2013.

In terms of the different income groups, the CPI excluding imputed rentals on OOA for the lowest 20% income group rose by 1.1 per cent. This was lower than the increases of 1.4 per cent and 1.8 per cent experienced by the middle 60% and highest 20% income groups respectively.

For the CPI-All Items index, the increase for the lowest 20% income group was 2.3 per cent, higher than the 1.9 per cent for both the middle 60% and highest 20% income groups. This was due to a larger increase in imputed rentals on OOA – which do not involve actual cash expenditures for households who own their homes – for the lowest 20% income group.

We have the data and the capacity to do the same, yet currently what we have published is the overall CPI and CPI for households earning RM3k and below; geographically we have the overall Malaysian index, which is further subdivided into Peninsular, Sabah and Sarawak; and we have the urban/rural divide.

Part of the public distrust over the CPI statistics is the lack of granularity – what we really need to see is a CPI for a bigger range of incomes e.g. at RM1k, at RM2k, at RM10k and so on.

We should also have, like India and Australia and a bunch of other countries, a CPI for each major city – I suspect major metropolitan areas like Penang and the Klang Valley would have significantly higher inflation rates relative to the whole country, if only because owner imputed housing rentals would be increasing at a faster pace as house prices have increased faster in those areas. The current subdivision between urban and rural indexes means that prices in places like Kangar and Raub are lumped in with prices in KL.

I don’t mean to say that the official CPI is wrong or misleading. What I do mean is that without greater detail, the credibility of official statistics is and will be questioned. Expanding the scope of publication would also, incidentally, provide greater input into policy decisions. Evidence-based policy is much to be preferred over evidence-less policy.

And while we’re at it, how about a cost of living index?