Dr Philomena Nyarko

THE GHANA Statistical Service (GSS) has reacted to some assertions made by Dr Mahamadu Bawumia, the vice presidential candidate of the NPP recently during the Ferdinand Ayim Memorial Lecture in Accra.

Dr Philomena Nyarko, acting Government Statistician, at a press conference in Accra yesterday, said Dr Bawumia’s statement that the country’s single digit inflation was “not consistent with the economic fundamentals and developments in some key indicators” was unfortunate.

Noting that GSS had not tampered with the principles and procedures it used to compute inflation rates, she said: “It is well known that correlation between variables does not necessarily imply causation. For example, when one takes interest rates, there are a number of factors that influence lending rates such as non-performing loans and corporate taxes. Again, computing price changes over a time interval that is not consistent with standard procedure for calculating inflation is misleading.”

Dr Nyarko added that the consumer price index on which the calculation of inflation was derived was a weighted average of the price changes of 242 commodities which were collected from 40 markets across the country. Again, she said price reading was done two times in a month to calculate monthly price averages for the computation of the Consumer Price Index (CPI).

“Therefore, one cannot use only few items in few selected locations as an indicator of the change in the general price level. The computation done by Dr Bawumia is more of a cumulative price change and not inflation. The standard approach for computing headline inflation is to calculate the change between the index for a particular month in the current year and that of the same month in the previous year.

“It is unacceptable for one to compute the cumulative price change between December 2008 and April 2012 and compare it the year-on-year inflation rate.”

Another issue which she clarified was the link drawn between the price of cement and inflation.

“It is worth noting that cement is not in the consumer basket. However, it may have some influence on the CPI through rent which is already included in the basket. Again, in computing the CPI, the relative importance (weights) of the items in the consumer basket is very crucial. Taking the prices of few commodities to generalize inflation without accounting for their weights in the consumer basket is inaccurate.”

“Dr Bawumia draws a link between the single digit inflation and the declining growth in crop production. We wish to emphasise that lower inflation rates in the food group does not mean that prices are not rising. The effect of the depreciation of the cedi is reflected in the inflation rate of imported food items. Available data indicates that imported food inflation has been consistently higher than local food inflation.”

She said in March 2012, for example, the figures were 9.0 percent for imported food inflation and 3.7 percent for local food inflation. However, only 16 out of the 81 items in the food subgroup are imported, indicating that the high price of imported food items would have very little effect on inflation.

“The GSS is a professional institution and has produced GDP, inflation and other statistics on the country over the years. GSS has transformed from a department under the Ministry of Finance & Economic Planning to an autonomous public sector institution with the enactment of the Statistical Service Law, 1985 (PNDCL 135) and has its own governing board. Currently, the service has finalized a proposal for a new Statistics Bill that will establish the GSS as the central statistics production and coordinating institution for the National Statistical System,” she stated.

“These, among others, are the reasons why we are unhappy that Dr Bawumia concluded in his speech on inflation by stating that ‘…it is time for Ghana to have a truly independent and well resourced statistical service’,” she said.

 By Samuel Boadi

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