​​​​​​​Rebased CPI and inflation demystified

​​​​​​​Rebased CPI and inflation demystified
Source: Ghana| Myjoyonline.com|Carine L. Malor(Mrs.)|Statistician
Date: 30-10-2019 Time: 04:10:31:pm

The Consumer Price Index (CPI), according to the United Nations is a current social and economic indicator that is constructed to measure changes over time in the general level of prices of consumer goods and services that households acquire, use or pay for consumption.

It is important to know that the CPI does not measure price levels but it measures price change over time.

In Ghana, it is calculated and reported by the Ghana Statistical Service. It measures changes in the price of a fixed basket of goods and services that are purchased by households. This is commonly known as inflation.

The methodology assumes that this basket of goods and services is purchased monthly and since prices are not static, the total price of this basket will change at every purchase.

Inflation is a quantitative measure of the rate at which the average price level of a fixed basket of goods and services in an economy increases over a period of time. Similarly, inflation is the constant rise in the general level of prices where a unit of currency buys less than it did previously.

The Ghana Statistical Service announced in its August release that the basket of goods and services used to compute the nation’s CPI and Inflation has been rebased. It is important for everyone to understand the dynamics regarding the rebased CPI.

The seventh round of the Ghana Living Standards Survey (GLSS) was used as the reference period for the basket of goods and services and their respective weights.

The GLSS is a survey that captures household expenditure and is conducted every five years. If there is any change in household spending, it will reflect in the survey results.

It was therefore not surprising that the basket of goods and services in Ghana was updated based on the 2017 GLSS, which is an indication that household purchases have changed over the past years.

As a result, 40 new items were added to the basket to total 307 as compared with 267 items in the old basket. The items in the basket were classified based on the UN’s Classification of Individual Consumption According to Purpose, 2018.

In addition, data collection points were increased from 42 markets in the old basket to 44 markets for the new.

The base year for the new series is 2018, implying that inflation figures released from August 2019 CAN NOT and SHOULD NOT be compared with previous rates.

This again implies that Bank of Ghana’s inflation target of +/-8 is obsolete and MUST BE reviewed to synchronise with the methodology used in rebasing the CPI.

The year-on-year inflation rate as measured by the CPI was 7.8% and 7.6% for August 2019 and September 2019 respectively. Comparing the rates for August 2019 and September 2019, it can be concluded that the rate at which prices of goods and services increase was lower by 0.2% in September 2019.

This does not mean that prices of goods and services did not increase within the month of September; it did but at a slower rate compared to price movements experienced within the month of August 2019.


The basket was divided into Food and Non-food groups to provide for further analysis for relevant stakeholders.

The Food inflation rate was 8.2% and 8.5% for August and September respectively while the non-food inflation was 7.4% and 7.0% for August and September respectively.

The major influencer for the Food inflation for both months was Fruits and Nuts (25.2% for August and 26.9% for September) while that for the non-food inflation was Alcoholic beverages, Tobacco and Narcotics (12.9% for August and 12.2% for September).