The Department of Census and Statistics has completed the latest household income and expenditure survey of the Greater Colombo Area and is in the process of revising the official inflation index.

The official inflation currently being used, Colombo Consumers’ Price Index (CCPI-N) was based on a household survey conducted in the Greater Colombo area and its suburbs in 2002.

"We have just completed the latest survey and the data is being processed. The inflation index is in the process of being revised," Director, Department of Census and Statistics, D. C. A. Gunawardena told the Island Financial Review.

"We had to conduct the survey in 12 cycles therefore, the survey covers the period of 2006 and 2007," he said.

Last April, the CCPI-N replaced the official index (also called the Colombo Consumers’ Price Index) which was based on a household income and expenditure survey conducted in Colombo in 1952.

Several analysts criticized the new index, for not being truly representative of consumption patterns of the working class. The consumption of alcohol, for example has been omitted from the index.

"No index can truly capture a 100 percent consumption pattern, but the index being used now is based on a survey conducted in 2002. The old index was based on a 1952 survey and obviously spending patterns have changed a great deal since then," Gunawardena said.

He said the reason to leave out alcohol and tobacco was because the department had to stay in line with the government’s zero tolerance on these items.

The old index had 220 items in its ‘basket of goods’ while the current index has 334.

Food items consisted of 68.3 percent of total expenditure based on the 1952 survey.

In the current index, food items are given a weight of 46.71 percent. On the other hand the following increases can be seen in the weights assigned to the new index from the old: Communication—4.42 from 0.16 percent; Transport—9.47 from 1.76 percent; Electricity—4.09 from .43 percent.

Gunawardena said he could not say when the revised index would be introduced.

"The index was made official last April, so we will need more time to analyze its effectiveness in monitoring the movement of prices.

"People must understand that this exercise is merely an attempt to keep tabs on general price movements. If they want to see what real inflation is, they should monitor their expenses more carefully," he said.

Inflation as measured by the point-to-point change peaked at 28.2 percent in June last year and came down to 14.4 in December.

"In January the point-to-point change could come down further to about 11 percent as food prices remain static and prices of other items decrease due to the global financial crisis," Gunawardena said.

However, he said that by taking the point-to-point comparison the percentage changes would record significant changes as prices spiked last year.

"The annual average, which shows the movement of inflation over the year, will be at around 22 percent," he said.