Central Bank reports a CPI variation rate of 0.34% in February

Central Bank reports a CPI variation rate of 0.34% in February
Santo Domingo, Dominican Republic, 03/17/2014

The Central Bank of the Dominican Republic reports that February inflation, measured using the variation of the Consumer Price Index (CPI), was 0.34% compared to the one during the month of January of this year.

The report released by the bank indicates that the cumulative inflation for the first two months of the year stood at 0.58%, down one percentage point from the 1.59% reached in the previous year. The annual inflation, measured from February 2013 to February 2014, reached 2.84%, which represents a significant reduction from the 4.73% registered in the same period last year.

The institution indicates that the annualized core inflation was 3.25%. This indicator measures the inflationary trend of monetary origin, isolating the effects of exogenous factors and reducing the volatility of the overall CPI, which allows the gathering of more clear signals to conduct monetary policy. Some agricultural goods, alcoholic beverages, tobacco products, fuels, managed and transportation services, which together account for 30.74% of the overall CPI, are excluded from the core CPI calculation.

The study explains that the groups with greater contribution to the CPI outcome were Housing and Transportation, which, by varying 1.30% and 0.62% respectively, accounted for 78.20% of the inflation for the analyzed period. This was due to their greater weighting in the composition of the national basket. The Liquor and Tobacco (1.60%) and Miscellaneous Goods and Services (0.49%) groups had a lesser influence. The Food and Non-alcoholic Beverages group contributed in the opposite direction when they registered a negative variation rate of 0.29% in February compared to January 2014.

Variation by Groups

The Housing group index recorded an increase of 1.30%. This result is mainly due to the 5.46% increase in the price of liquefied petroleum gas for domestic use (LPG), and to a lesser extent to the increase in housing rental service of 0.16 percent.

The growth of 0.62% in the Transport group index reflects the higher prices of regular (1.01%), and premium (1.04%) gasoline, liquefied petroleum gas (LPG) for vehicles (5.46%), and diesel (0.98%), due to the weekly adjustments mandated by the Ministry of Industry and Trade, in compliance with Law 112-00 on Hydrocarbons. The increase of 0.27 percent in car prices also had an impact on these results.

The CPI of the Alcohol Beverages and Tobacco group reflected a 1.60% variation, which is explained by the continued implementation of Law 253-12, with the staggered rate adjustments and specific amounts of the Selective Consumption Tax (ISC) to alcohol and tobacco products planned for this year. Also, the increased rate of 0.49% in the Miscellaneous Goods and Services group was due to the verified rise in the price of personal care goods and services.

The CPI of the Food and Non Alcoholic Beverages group showed a negative variation of 0.29% in February compared with the previous month, which is mainly explained by the lower prices of some greater weighting products, such as fresh chicken (-7.96%) and eggs (-6.88%). Other products that also experienced price reductions were cassava (-4.50%), potatoes (-9.07%), green pigeon peas (-4.74%), red beans (-1.28%), and white sugar (-2.54%). An important aspect to note is that the reduction in prices of some food commodities of great weighting in the national basket more than offset the impact of the rate increase of the Tax on the Transfer of Industrialized Goods and Services (ITBIS) provided for in Law 253-12, whose implementation in major supermarket chains began in February.

Inflation of Tradable and Non Tradable Goods

The CPI for tradable goods and services, those that can be exported and imported without restrictions, had a variation of 0.81%, basically due to price increases in fuel, cars, tour packages, cigarettes, bottled beer, and some food commodities.

The index rate of non-tradable goods and services, which by their nature can only be marketed within the economy that produces them, or which are subject to measures that restrict their free trade at the international level, declined by 0.17%. This was largely due to the low prices of fresh chicken, red beans, and white sugar, whose greater weighting compensated for the increased price of rice, milk, and housing rental services and the daily meal.

Inflation by Geographic Areas

The price analysis by geographic areas shows that the index of the Ozama region, comprising the National District and the province of Santo Domingo, registered a variation of 0.40%, the Northern region 0.35%, the Eastern region 0.14%, and the Southern region 0.26%. The highest rate of variation of the Ozama region is largely explained by the lower impact of the Food and Non-Alcoholic Beverages group in this geographical area, while the moderate growth observed in the Eastern region of the country was due to the more pronounced negative variation of the same group.

Inflation by Quintiles

CPI results by quintiles registered lower rates in lower expense quintiles, which respond to the increased incidence of price decreases in food commodities for these population segments, where they have a greater weighting. In this sense, the quintile 1 index, with the lowest spending, showed the lowest rate of variation, 0.15%, while the CPI of quintile 5, with the highest spending, grew 0.46%, mainly due to the greater impact of the increase in fuel prices and housing rental service.