1

REPUBLIC OF THE MARSHALL ISLANDS

CONSUMER PRICE INDEX

Economic Policy, Planning and Statistics Office

Office of the President

July 6

Majuro and Ebeye, RMI

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Table of Contents

INTRODUCTION ....................................................................................................................... 1

MAJURO CPI MOVEMENT: 1st and 2nd QUARTER 2017....................................................... 2

EBEYE CPI MOVEMENT: 1st and 2nd QUARTER 2017 4

ACKNOWLEDGEMENTS ....................................................................................................... 10

Annex 1: Overview of 2002 RMI HIES and Construction and Methodolody of Consumer

Price Index ................................................................................................................................. 11

Annex 2: Construction and Methodology of Ebeye Consumer Price Index ............................. 14

Annex 3: Consumer Price Index Basket of Goods ................................................................... 16

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Consumer Price Index

INTRODUCTION

The Consumer Price Index (CPI) is an important economic indicator. It is used as a measure of

inflation as well as to provide information about price changes inthe Republic of the Marshall

Island’s (RMI)economy tokey decision and policy makers in the government, private sector and

NGOs. It is an important tool/guide used by the RMI government in making economic decisions

such as formulating fiscal and monetary policies.

RMI’s CPI is based on the findings obtained in Household Income and Expenditure Survey

(HIES) conducted in 2002. The base used is 1st Quarter 2003 (100 index).

Funding of the 2002 was provided by US Department of Interior Office of Insular Affairs with

matching supplemental funds and in-kind support from the RMI government. Technical

assistance in the processing of the RMI 2002 HIES results and the derivation of the CPI was

provided by staff members of the U.S. Bureau of the Census International Program’s Center,

with assistance from the Economic Policy, Planning and Statistics Office (EPPSO).

As with most CPIs around the world, EPPSO continues to use the Laspeyres method to calculate

the CPI. This is the most widely used and internationally accepted method of calculating price

change for a CPI. Refer to Annex 1 for a detailed account of RMI 2002 HIES and the construction

and methodology used in calculating the CPI.

Additionally, a new system for the CPI for Ebeye was established through the technical

assistance provided by the Secretariat of the Pacific Community (SPC). Implementation of the

technical assistance was met and successfully completed by Chris Ryan of SPC, with assistance

of John Henry of EPPSO. Ebeye CPI use a base of 4th quarter 2006 (100 index). Detailed

description of the construction and methodology used in calculating the Ebeye CPI can be found

in Annex 2.

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CPI Analysis: 1st and 2nd Quarter 2017

MAJURO CPI MOVEMENT: 1st and 2ndQUARTER 2017

Over the 1st and 2nd quarter 2017 comparisons, the Consumer Price Index (CPI) decreased by -

0.35 percent in the first quarter and was followed by an increase of 0.63 percent in the second

quarter. The main contributor to the downward trend derived from Food, Alcoholic Beverage,

Other Goods and Services Group.

The average food price for the first quarter decreased by-1.28 percent and was followed by an

increase of 0.61 percent in the second quarter. Alcoholic beverage group also applied the same

scenario, which in the first quarter declined by -0.64 percent and picked up in the second quarter

by 2.51 percent. Apparel group increased by 0.80 percent and also increased in the 2nd quarter

by 0.05 percent. Transportation groug experienced an increase of 0.99 percent in the 1st quarter

and showed no price movement in the 2nd quarter. Other goods and services group declined by -

0.22 percent and picked up in the 2nd quarter by 3.56 percent.

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Food Group

Food group experienced a -1.28 percent decrease in the 1st quarter and an increase of 0.61percent

in the 2nd quarter. The main driver of this movement came from the food basket of:

Cereals (breakfast) down 0.06 percent

Bag of rice down 0.03 percent

Bag of flour down 0.02 percent

Canned Corned beef up 0.05 percent

Canned Mackerel down 0.05 percent

Canned Tuna down 0.08 percent

Alcoholic Beverage Group

The Alcoholic Beverage group decreased by -0.64 percent over the 1st quarter and during the 2nd

quarter, the average price of beer increased by 2.51 percent.

Apparel Group

The price index for Apparel Group increased by 0.80 percent over the 1st quarter and increased

in the 2nd quarter by 0.05 percent. The main contributor to this upward trend was the other

women’s and girls’ clothing increased by 0.27 percent. In the 2nd quarter, average price for shirts

(men’s or women’s) went up by 0.11 percent.

Transportation Group

The transportation group increased by 0.99 percent during 1st quarter and showed no price

movement in the 2nd quarter. Average price of gasonline saw a slight increase of 0.03 percent in

the 1st quarter and again showed no price movement in the 2nd quarter.

142.00

144.00

146.00

148.00

150.00

152.00

154.00

4th Qtr2014

1st Qtr2015

2nd Qtr2015

3rd Qtr2015

4th Qtr2015

1st Qtr2016

2nd Qtr2016

3rd Qtr2016

1st Qtr2017

2n Qtr2017

Majuro Consumer Price Index Movement: 2014_q4 to 2017_2

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Other Goods and Services Group

This group saw a decline of -0.22 percent in the 1st quarter and increased by 3.56 percent in the

2nd quarter. The main driver of this downward was the average of cigarette went down by 0.02

percent. Average price of cigarette and toilet tissue both went up by 0.07 percent in the 2nd

quarter.

Other Groups

The following groups remain unchanged over the 1st and 2nd quarters 2017:

• Housing, Utilities and Major Appliances

• Medical Care

• Recreation

• Education and Communication

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EBEYE CPI MOVEMENT: 1st and 2nd QUARTERS 2017

Ebeye experienced a downward trend of 145.41 in the price index in the 1st quarter and was

followed by an increase trend of 145.87 in the 2nd quarter. The groups responsible for the changes

are Food, Apparel, Recreation, and Other Goods and Services.

The average food price for the 1st quarter increased to 0.71 percent and was followed by a 0.28

percent in the 2nd quarter. Apparel experienced a down trend of -3.08 percent in the 1st quarter

and picked up in the 2nd quarter to 2.76 percent. Other Goods and Services group recorded a 2.84

percent increased in the 1st quarter and remained constant throughout the 2nd quarter.

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Food Group

Food group experienced an increase of 0.42 percent in the 1st quarter and an increase of 0.32

percent in the 2nd quarter. The driver of this upward trend came from the food basket of:

Bag of Flour up 0.02 percent

Chicken leg up 0.02 percent

Bottle of water up 0.38 percent

Sugar up 0.07 percent

Luau Drink Mix up 0.02 percent

Potato up 0.02 percent

Sodas up 0.03 percent

Apparel Group

This group experienced a downward trend of -3.08 percent in the 1st quarter and picked up to

2.76 percent in the 2nd quarter. The main contributors to this movement came from these items:

Other women clothing up 0.07 percent

Sandals up 0.07 percent

Zorrie up 0.17 percent

Diapers up 0.09 percent

Other Goods and Services Group

This group saw an increase of 2.84 percent during the 1st quarter 2017. The average price of

toothpaste went up by 0.04 percent. This group showed no movement in the 2nd quarter 2017.

Other Groups

The following groups experienced no change over the 2nd and 3rd quarter 2016 –

• Alcoholic Beverage

• Housing, Utilities and Major Appliances

• Medical Care

• Recreation

• Education and Communication

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Majuro and Ebeye CPI Comparison: 1stand 2ndQuarter 2017

As illustrated in Chart 1 below, the trends continue with the average prices of commonly

purchased goods remaining higher in Ebeye compared to Majuro over the 1st and 2nd quarters

2017. In the 1st quarter, the cost of common goods totaled $138 in Majuro; whereas, in Ebeye,

the basket of goods cost $175 (26.9 percent difference). This is an upward trend from 22.8

percent marginal difference obtained from the previous quarters. The average prices of common

goods such as rice, canned meat, coffee, and sugar have dropped while the reverse occurred on

Ebeye, i.e. the prices for common goods went upward as compared to previous quarters.

Over the 2nd quarter 2017, the percent of marginal difference increased 28.7 percent comparison,

the same basket of goods averaging a total cost of $137 on Majuro while the total cost of goods

went upward to $176 on Ebeye. It means that Majuro basket of goods went downward by 1

percent while Ebeye’s basket of goods rose 1 percent during 1st and 2nd quarters 2017.

Chart 1. Majuro & Ebeye Basket of Selected Items Price Comparison

139 140 140 138 137

175 174 172 175 176

0

20

40

60

80

100

120

140

160

180

200

1st Q 2016 2nd Q 2016 3rd Q 2016 1st Q 2017 2nd Q 2017

Ave

rae

Pri

ce

Majuro and Ebeye Price Comparsion, 1st and 2nd qtr 2017Majuro Ebeye

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Acknowledgements

ACKNOWLEDGEMENTS

The CPI is an important tool/guide used by key decision makers in the RMI government, private

sector and NGOs. Aside from the CPI being used as a measure of inflation, it also provides

valuable information such as price changes, cost of living and effectiveness of monetary and

fiscal policies being implemented in the RMI. These are critical factors in implementing

informed decision making.

In light of this, EPPSO takes this opportunity to express its gratitude and acknowledgement to

the RMI government for its continued support towards the work of the office. Secondly, the

office kindly express its appreciation and acknowledgement to the Management of the

Businesses on both Majuro and Ebeyewhom have continue to extend EPPSO the courtesy to

collect prices from their respective premises on a quarterly basis. Without the continued support

and participation of each respective Management and Business, the production of the Consumer

Price Index will not be possible. Finally, we thank the data userswho make our work meaningful

and worthwhile- your continued demand for EPPSO’s service is what gives meaning to our

continued existence.

Should you need additional information regarding this CPI report, please do not hesitate to

contact any of our staff at EPPSO.

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ANNEX 1

Annex 1:Overview of 2002 RMI HIES andConstruction and

Methodolody ofConsumer Price Index

Survey Overview:

Over a 2-month period from April to May 2002, the staff selected four sample areas of Majuro,

Ebeye, Jaluit and Likiep. The selection of these sample areas was judgmental and was based on

choosing the largest population centers (Majuro and Ebeye) and then two other areas that were

logistically feasible to reach in conducting the survey and were in the middle of the islands that

were ranked by population.

This survey used two types of survey methods to gather data. For the more expensive and less

frequently purchased items, such as major appliances, electronic goods, new and used vehicles,

etc., a pre-printed, survey questionnaire was completed by an interviewer. For those items,

which are more frequently purchased, such as food, tobacco, drinks, etc., the household

respondent was given a diary to record all purchases during a one-week period.

Household Sample:

A total sample size of 700 in all four areas was used for the questionnaire portion of the survey.

A total of 657 households agreed to participate. For any country getting such a high participation

rate is an enviable achievement. For the diary portion of the survey, 355 households

participated.

Selection of the Item Sample:

In the summer of 2002, staff members of the U.S. Bureau of the Census International Program’s

Center processed the RMI’s HIES data. These items and expenditures were arrayed using the

U.S. Bureau of Labor Statistics CPI classification system as a frame of reference. Then, using a

statistical technique called “Probability Proportionate to Size”; a new item sample was selected.

Using the PPS technique to select the item sample ensured that those items with the highest

monthly household expenditures were selected in the sample. The sample included a total of 61

items compared in the revised CPI.

Expanding the Major Groups:

Using the US Bureau of Labor Statistics (BLS) Classification System as a frame of reference

allowed EPPSO to expand the number of groups included in the RMI’s CPI. Instead of having

four major groups, the revised CPI now has 9 major groups. Having more groups allows the

users to understand better which groups are responsible for the increases/decreases of the CPI.

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In the previous CPI, for example, alcoholic beverages were a part of the Food Group. Now, it is

one of the 5 new groups. The others are: Housing, Utilities and Appliances, Medical Care,

Education and Communication and Other Goods and Services.

Expansion of the Outlet Sample:

The previous CPI collected price data from 4 different outlets. In the revised CPI, the number

of retail outlets has been expanded by more than ten-fold and the outlet sample now consists of

46 different retail outlets. These are more diversified and geographically dispersed throughout

Majuro. This substantially larger outlet sample ensures that EPPSO collects retail price data

from a wide variety of outlets.

Data Collection and Price Review Manual:

EPPSO has made another enhancement to the CPI by increasing the data collection training and

by formalizing this vital aspect of price collection by developing a Data Collection Manual. This

new manual covers virtually all aspects of price collection ranging from initiating the retail outlet

to the rules for selecting a retail item and re-pricing. This new manual will improve data

collection quality because it will provide guidance to the data collectors in handling almost any

type of re-pricing situation.

Linking the Old and New CPIs:

In the 1st Quarter of 2003, data collectors collected price data for both the old and revised CPIs

and the two indexes were “spliced” together at that point. In order for two indexes to be linked

together, there must be at least one period where prices are collected for both the old and the new

indexes. Beginning in the 2nd Quarter 2003, EPPSO collected price data for only the items in

the revised CPI. From the 4th Quarter 2002 to the 1st Quarter 2003, the price change was based

on the previous CPI; from the 1st to the 2nd Quarters 2003, the price movement reflected the

change in prices for revised CPI.

Changing the Base Period:

Another change in the CPI was rebasing it from 1982 = 100 to the 1st Quarter 2003 = 100. This

is a mathematical change in the CPI but the more recent base period will make the CPI easier for

users to understand. There is virtually no difference in the percent changes from the old CPI

from one period to another and the same indexes on the base period.

Calculating the Consumer Price Index

As with most CPIs around the world, EPPSO will continue to use the Laspeyres method to

calculate the CPI. This is the most widely used and internationally accepted method of

calculating price change for a CPI. The Laspeyres formula is shown below:

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Laspeyres Formula:

n n

In = (∑ piq0 /∑ p0q0) x 100

i=1 i=1

where,

In = Price Index in period n

∑ p1q0 = the costs of a market basket of goods and services in period n

i = 1

n

∑ p0q0 = the costs of a market basket of goods and services in the base period

i = 1

p = price of the good or service

q = quantity of the good or service

i = index for the good or service (where i goes from 1, …,n)

This method of index computation uses the quantities of commodities purchased in the base

period as the basis for computing the value of the “market basket.” First, there arenumber of

items in the market basket with each having a base quantity. Each of these items has a base

price, p0 and current price, pi. Multiplying p0 with q0 gives the total expenditure for a particular

commodity for the base period. Current expenditure for an item is obtained by multiplying pi

with q0. The sum of current expenditures for all items in the market basket is expressed as ∑

piq0, while the sum ∑ p0q0 is the total market basket expenditures in the base period. Notice

that in both summations the term q0 remains constant, which means by using the same quantities

only price changes are reflected in two pricing periods.

For those unfamiliar with statistical notation, trying to read and understand the above explanation

can be an intimidating experience. The above simply means that all of the 61 items in the CPI

are priced every pricing quarter and the prices for each item in the current quarter are compared

to the same prices in the base period. The base period is the 1st quarter 2003 when the CPI was

set equal to 100. That is when the CPIs for each of the 9 major groups and the All Items = 100.

In actuality, EPPSO uses a slight variation to this formula. Each month, the sums of the prices

that are collected for each item are compared to the sums of the same prices in the previous

quarter – not the base period. The sum of the prices of an item in the current quarter is divided

by the sum of the prices in the previous quarter to calculate a price relative. This price relative

is multiplied by the item’s weight in the previous quarter to update the item’s weight in the

current quarter. This product is then divided by the item’s weight in the base period to calculate

an item’s CPI. By summing the updated weights for all of the items in a group and dividing

that sum by the same weights in the base period will calculate the group’s current CPI.

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ANNEX 2

Annex2:Constructionand Methodologyof Ebeye Consumer

Price Index

New System for the Consumer Price Index for Ebeye has been established through technical

assistance provided by the Secretariat of the South Pacific (SPC) to satisfy inquiry made by

EPPSO. Implementation of the technical assistance was met and successfully completed by

Chris Ryan of SPC, with assistance of John Henry of Economic Policy, Planning and Statistics

Office. The effort was carefully worked through a proposed set of items to tie in with the nine

key groups of the RMI CPI in order to produce a broad level of weights for Ebeye. As a result,

new weights were derived for the Ebeye Consumer Price Index but were not exactly yielded as

the weights generated for the four islands combined in the preceding Household Income and

Expenditure Survey (HIES 2002). As new weights achieved were very close to the old weights,

calculation of new CPI in the future will not be an issue.

Table 2. Comparison between old & new Ebeye weights

GROUP

Weight

New Old

Food 46.7 73.4

Alcoholic Beverages 1.4

Housing, Utilities and Major Appliances 15.9 0.1

Apparel 6.1 2.4

Transportation 12.3 9.0

Medical Care 0.9

Recreation 2.2

Education & Communication 4.4

Other Goods & Services 10.1 15.1

TOTAL 100.0 100.0

The table above shows a new structure of the Ebeye Consumer Price Index developed from the

effort.

Relative Importances of CPI Groups

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

Food

Alcoh

olic B

ev.

Housin

g

Appare

l

Trans

porta

tion

Medi

cal C

are

Recrea

tion

Educat

ion/C

omm

unic.

Oth

er Goo

ds/Serv

ices

Per

cen

tag

es

Series1

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After working through each group in the broad level weights of the Ebeye Consumer Price Index,

new weights were drawn for each group – i.e. Food Group (73.4 drops to 46.7); Housing, Utilities

and Major Appliances Group (0.1 increases to 15.9); Other Goods & Services (15.1 drops to

10.1); The Alcoholic Group, the Medical Care Group, the Recreation Group, and the Education

& Communication that were not accounted for in the old CPI for Ebeye now are included.

Table 3. Comparison between Ebeye weights and RMI weights

GROUP

Weight

Ebeye Majuro

Food 46.7 35.9

Alcoholic Beverages 1.4 1.7

Housing, Utilities and Major Appliances 15.9 17.1

Apparel 6.1 4.3

Transportation 12.3 13.7

Medical Care 0.9 2.2

Recreation 2.2 2.3

Education & Communication 4.4 6.6

Other Goods & Services 10.1 16.2

TOTAL 100.0 100.0

As can be seen from the table above, a new comparison reference to the weights of Ebeye versus

the RMI weights is good presentation and is giving a good idea of relative importance of each

group across the two Consumer Price Indexes of the country.

It is important to note that changing the base period of the Ebeye Consumer Price Index from 1st

quarter 2005 = 100 to 4th quarter 2006 = 100 was necessary in order for the new system to work

properly.

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ANNEX 3

Annex 3:Consumer Price Index Basket of Goods

RMI Consumer Price Index Basket of Goods

Housing, Utilities and Major Appliances

Food Housing

Bread and Cereals Rent

Cereals (breakfast cereal, etc.) Utilities

Rice Kerosene

Flour Water (piped or delivered)

Ramen and other instant noodles Electricity

Bread Major Appliances

Donuts, pastries, etc. Refrigerator

Meats, Poultry, Fish and Eggs Freezer

Steak/beef (all types) Washing machine

Canned corned beef Air conditioner

Canned luncheon meat (Spam, etc.) Tools, Hardware, Outdoor Equipment

Whole chicken (frying chicken, etc.) Fishing Gear

Turkey and turkey parts Apparel

Chicken legs Apparel

Chicken breasts and all other parts Other men's and boys' clothing

Canned mackeral Shirts (men's or women's)

Canned tuna Other women's and girls' clothing

Fresh deep-sea fish (tuna, marlin, wahoo, etc.) Sandals

Fresh reef fish Zorries

Eggs Diapers (disposable)

Dairy Products Transportation

Milk - evaporated Transportation

Ice cream Gasoline (for car, truck or boat)

Fruits and Vegetables Off-island travel expenditures (airfares)

Other fruits and vegetables Medical Care

Non-alcoholic Beverages Medical Care

Coke Hospital visits

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Pepsi Health insurance

Colas- all others Recreation

Coffee (instant coffee) Video and Audio Goods and Services

Bottled water/spring water Television

Drink mix (KoolAid, Luau mix, etc.) Video player

Sugar and Sweets Radio

Sugar Video rentals

Other Food at Home Educaton and Communication

Chips- potato, banana, etc. Education

Soy sauce Tuition

Other other food products Communication

Food Away from Home Telephone

Plate lunch Other Goods and Services

Restaurant meals Tobacco Products

Alcoholic Beverages Cigarettes

Alcoholic Beverages Other Personal Goods

Beer Toilet paper