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CPI declines after phone rate cut

A man speaks on his mobile phone in Beirut, Monday, July 21, 2014. (The Daily Star/Hasan Shaaban)

BEIRUT: Lebanon’s consumer price index fell drastically in June, with some analysts attributing the drop to telecoms price cuts instituted over the past two month.

The Central Administration of Statistics’ June CPI, published Monday, showed a 0.7 percent decline between May and June.

The June results follow a 0.3 percent drop in May, for a drop of 1 percent in the Consumer Price Index over the last two months.

“Clearly, the telecoms rate cuts are considered to be the biggest factor behind the drop in inflation. But it is not the only factor, because one has to look at the weight of each category in the CPI to be able to judge on the real factors behind this drop,” said Nassib Ghobril, head of the Economic Research and Analysis Department at Byblos Bank.

“Other factors have also contributed ... including the decline in the prices of food and non-alcoholic beverages by 0.6 percent, and this category makes up 20.6 percent of the CPI,” he said, adding that transportation costs, which account for 13.1 percent of the CPI, have decreased by 0.3 percent.

The telecoms sector of the CPI dropped by 20.9 percent between May and June. While telecoms are only weighted at 4.6 percent of the total CPI, this drop was large enough to lower the overall index by 0.96 percent, which means that without the telecoms rate cuts, Lebanon might have witnessed higher inflation in June.

“ Lebanon would have probably witnessed higher inflation in June if it wasn’t for the telecoms rate cuts, because the index for utilities such as housing, water, electricity gas and fuel has gone up by around 2 percent and this category accounts for 28.5 percent of the CPI,” Ghobril said.

Telecommunications Minister Boutros Harb has ordered steep price cuts across a range of communication services in Lebanon since taking office in February. The price of calls was lowered in May, while new land-line, mobile phone and Internet plans officially went into effect July 1, though some companies began charging the new rates in June.

The drop in the telecoms prices was offset in part by a 1.8 percent increase in the utilities component of the CPI. This includes water, electricity and gas costs. Lebanon is witnessing a drought, with many consumers increasingly forced to rely on private water suppliers as the public providers are rationing.

Across the other components of the CPI, the largest movements in June were clothing and footwear, which dropped 1.9 percent; food and non-alcoholic beverages, which dropped 0.6 percent; and recreation, which rose 0.6 percent.

The regional subindexes all recorded a drop in prices in June, led by the Bekaa at 0.7 percent, Nabatieh at 0.6 percent and Beirut at 0.5 percent.

Compared with last year, the CPI was up 2.5 percent in June. The latest results are the first in five months to include an annual result, as the government did not collect statistics from January-May 2013.

Communication prices are down 21.2 percent compared with June 2013, while most other components of the CPI have risen in that time. Alcohol and tobacco led the increases, at 12.5 percent, education at 7.1 percent and clothing at 6.3 percent.

 
A version of this article appeared in the print edition of The Daily Star on July 22, 2014, on page 5.

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Summary

Lebanon's consumer price index fell drastically in June, with some analysts attributing the drop to telecoms price cuts instituted over the past two month.

The June results follow a 0.3 percent drop in May, for a drop of 1 percent in the Consumer Price Index over the last two months.

The telecoms sector of the CPI dropped by 20.9 percent between May and June. While telecoms are only weighted at 4.6 percent of the total CPI, this drop was large enough to lower the overall index by 0.96 percent, which means that without the telecoms rate cuts, Lebanon might have witnessed higher inflation in June.


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