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Government adjusts, expands price index

People buy vegetables at a supermarket in Beirut. (The Daily Star/Mohammad Azakir)

BEIRUT: Lebanon’s revised Consumer Price Index could represent a basis for the calculation of annual wage adjustments, officials told The Daily Star.

Labor unions and consumer protection organizations have long complained that the previous techniques used to calculate the CPI lacked transparency in reporting fluctuations in prices and the yearly inflation rate.

Following consultations with officials from the International Monetary Fund, representatives of the private sector and labor unions, the Central Administration of Statistics launched last week a revised version of the CPI.

In the revised CPI, the reference month was switched from December 2007 to December 2013 and the weights attributed to several components of the index were modified based on a recently conducted household survey.

The weight attributed to the food and nonalcoholic beverages component was adjusted from 19.9 to 20.6, and transportation was raised from 12.3 to 13.1. The weight for the housing, water, electricity and gas component also increased from 25.7 to 28.5 while the weight for the health care component was raised from 6.8 to 7.8.

“While the increase in the weight of the transportation component is accurate, the weight for the food and nonalcoholic beverages component should be significantly higher,” said Zouhair Berro, head of Consumers Lebanon, a member of Consumers International, an organization that defends consumers’ right.

Berro argued that around 80 percent of Lebanese households earn less than $1,000 per month and spend around 40 percent of that income on food and beverages.

According to a national household budget survey recently issued by the CAS, the average household spending in Lebanon totaled $20,749 in 2012 with spending on housing, water, electricity and gas accounting for $5,913 or 28.5 percent of total expenditures followed by food and nonalcoholic beverages at $4,266 or 20.6 percent.

“Despite the need for further amendments, the revisions introduced to the CPI represent a positive step toward better transparency in reporting,” Berro told The Daily Star.

Berro added that besides modifying the weight of components to better represent household spending, calculations should be based on the shelf price of commodities rather than price lists provided by retailers.

In addition to applying new weights to components, the CAS broke down some components of the CPI such as rent into two or three subcomponents.

The new rent component separates between the cost under the old lease law and new rent contracts.

The revised CPI is also divided into six subindexes covering Lebanon’s governorates, which comprise Beirut, Mount Lebanon, the North, the Bekaa, the South and Nabatieh.

Head of the General Labor Confederation Ghassan Ghosn told The Daily Star that the new CPI could be used as a point of reference to calculate yearly wage increases on a scientific basis.

Representatives of the General Labor Confederation and Economic Committees, a body that represents the private sector, will discuss the details of the revised CPI Wednesday with the CAS committee, Ghosn said.

The meeting will be held at the Labor Ministry and will be attended by representatives of the Finance and Economy ministries.

“The CPI represents the basis for any wage increase in line with the yearly inflation rate,” Ghosn said, arguing that yearly wage adjustments would revive the economy by boosting consumption as a result of the increased purchasing power of the Lebanese.

“Enacting a wage hike every five or 10 years would fuel inflation and offset its benefits on the Lebanese while yearly wage adjustments enacted in accordance with the increase in the CPI would revive the economy,” Ghosn said.

The CAS Consumer Price Index for February 2014 showed a 0.7 percent drop from the previous month. Out of the 13 components, nine increased, three declined and one remained unchanged. The largest drop was in the price of clothing and footwear, which decreased 9.2 percent. The food and nonalcoholic beverages component decreased by 0.5 percent, while a similar drop was registered for the housing, water, electricity and gas component. The recreation, amusement and leisure component increased 0.7 percent.

 
A version of this article appeared in the print edition of The Daily Star on March 24, 2014, on page 5.

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Summary

Lebanon's revised Consumer Price Index could represent a basis for the calculation of annual wage adjustments, officials told The Daily Star.

In the revised CPI, the reference month was switched from December 2007 to December 2013 and the weights attributed to several components of the index were modified based on a recently conducted household survey.

According to a national household budget survey recently issued by the CAS, the average household spending in Lebanon totaled $20,749 in 2012 with spending on housing, water, electricity and gas accounting for $5,913 or 28.5 percent of total expenditures followed by food and nonalcoholic beverages at $4,266 or 20.6 percent.

In addition to applying new weights to components, the CAS broke down some components of the CPI such as rent into two or three subcomponents.

The CAS Consumer Price Index for February 2014 showed a 0.7 percent drop from the previous month.


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