The Pakistan Bureau of Statistics (PBS) is the most important data collection and dissemination authority in Pakistan. It is not the most reliable. Last year in November, the PBS infamously calculated the gas price increase for CPI at 104 percent, which was later ‘rationalized’ to 85 percent, after being called out. (Read: PBS owes a correction, published on Nov 5, 2018 & High inflation, low common sense, published on Nov 6, 2018). Not that the rationalization exercise was anything close to reality, as ‘simple averages’ is what the PBS is fond of.
Come August 2019, and nobody expected the PBS to alter its methodology midway to start using weighted averages (and common sense). Then again, the PBS was at least expected to do the simple averages better than they have.
So the gas price increase after revision with effect from July 2019 has been calculated at a 142 percent on year-on-year basis. This is very close to reality (of simple average) as the simple average increase as per Ogra’s revised schedule of tariffs comes around 133 percent. Recall that the tariffs had been increased substantially in July 2019, and the CPI gas price increase has jumped from previous reading of 85 percent to 142 percent.
This should also mean the month-on-month increase, of the revision from previous increase less than a year ago, is also substantial. And it was, but the PBS somehow, could not calculate it correctly. The month-on-month increase in gas price has been computed at 30.9 percent only. While, in reality, the change should be close to 76 percent, as per Ogra’s announced final tariffs.
And now, the PBS has not suddenly opted for the much-desired weighted mechanism, as evident from the year-on-year change, which is very close to actual change. Also, the weighted average changes work out at 104 percent and 69 percent, for year-on-year and month-on-month calculations, respectively. The mistake (hopefully an honest one), has understated the month-on-month CPI by 0.71 percentage points, as the impact on gas alone should be 1.2 percentage points instead of 0.49 points. What is 2.29 percent in terms of month-on-month inflation for July 2019 should actually be 3.0 percent – making it the highest month-on-month CPI increase ever since the rebasing eleven years ago in July 2008.
Come November 2019, when the inflation for October 2019 is announced, the year-on-year CPI will also reflect the faulty calculations, massively underreporting the actual impact. The impact in percentage points in year-on-year terms is currently 2.26. That will come down to just 0.49 percentage points in October 2019, because the PBS has calculated gas price change at 30.9 percent. A massive understatement of 1.76 percentage points, when it should actually be reading an impact of 1.2 percentage points.
On the electricity front, PBS has worked out a month-on-month change of 2.63 percent. Recall that the power tariffs were revised upwards for consumers above 300 unit categories w.e.f July 2019, and heartening to see the simple average of the revision does come out to be 2.63 percent. What is interesting to see is that this was not made part of the tariff notification, which has always been the basis of PBS’s power tariff calculations.
Now one wonders, if common sense can be applied to rightly include something that was not made part of the official tariff notification but still had a sizeable impact, why can’t the same be done with monthly fuel price adjustments? Maybe the rebased CPI will take that into account. But for now, the gas price blunder is once again the story of the day, and the PBS would do well to come out with a correction or a counter claim.
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