Residents’ buying power weakened

Residents’ buying power weakened further during the first quarter of 2009 as the cost of living on the islands showed an annual increase of 5.8 percent, even as the Department of Commerce revised the consumer price index (CPI).

The new base period will be the fourth quarter of 2008.

Any increase in the CPI means a spike in the prices of most things CNMI residents spend their money on, including food, housing and utilities, transportation, apparel, medical care and education.

From 94.7 percentage points in the first quarter of 2008, the CPI rose to 100.2 in the same period this year, latest data from Commerce’s Central Statistics Division shows.

Housing and utilities, food and transportation showed the largest price increases in the first quarter. Prices of housing and utilities went up by 8.1 percent, while food costs rose by 6.7 percent.

In a statement, Commerce said the revised CPI has a number of significant improvements that will make it an even more accurate measure of price movement than ever before. It replaces a CPI that was used based on household expenditures on a 1997 survey.

A CPI is usually a country’s most visible economic indicator of inflation, or in some cases, deflation.

“Revising the CPI has taken four years, beginning with the CNMI’s Household Income and Expenditure Survey initiated in April 2005,” said Commerce, adding that the survey collected detailed data on how households spend their money.

The data was derived from over 800 questionnaires and diaries completed by households on Saipan, Tinian, and Rota. The samples were collected and keyed. A new item sample was selected and new item weights were calculated for the CPI.

The funding for this major project came from the U.S. Department of the Interior’s Office of Insular Affairs, which has been trying to improve the statistics in the insular areas through its Statistical Enhancement Program.

Although many of the items were also in the old CPI, there were a number of new items added to the index based on the 2005 survey. The number of items priced quarterly increased from 113 items to 161 items. The item sample was chosen using probability methods that ensured that the most important items, in terms of average monthly household expenditures, were selected.

The revised CPI continues to have nine major groups that conform to the groups in the U.S. Consumer Price Index and with those of all of the other insular areas.

The nine groups are: food, alcoholic Beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services.

In the first quarter of 2009, the prices for the “all items index” in the revised CPI averaged up 0.2 percent from the last quarter and 5.8 percent from a year ago.

Prices for alcoholic beverages, medical care and other goods and services led the quarterly increases—6.5, 2.8 and 1.7 percent—respectively. Partially offsetting those increases were declines in education and communication, 3.6 percent, with fractional decreases in the housing and apparel categories.

The year-to-year comparisons showed that prices for other goods and services rose 9.5 percent, with housing rising 8.1 percent and food increasing by 6.7 percent. Transportation prices also increased, rising 5.0 percent. Alcoholic beverages and medical care rose 4.4 and 3.0 percent, respectively, over the year.

Recreation costs declined over the last 12 months by 4 percent. This was followed by decreases in education and communication, down 2.9 percent and apparel, down 1.2 percent.