How is it possible that in one month we can see organized consumer dissatisfaction with price increases, basic consumer products becoming more expensive due to a regulatory act, and at the same time inflation slowing down? It turns out that the National Statistical Institute is adapting its statistics on the cost of living by changing the weights of the various goods and services that fall into the consumer basket. The model in the latest change in the methodology is that the weight of the goods and services that are becoming more expensive decreases, and those that are becoming cheaper or their prices remain unchanged increase their weight.
This is what Stefan Antonov commented on for "Voices".
A reference to the attached table for calculating the harmonized index of consumer prices shows that the NSI updates the weights of individual products in the common basket every year. The table has nearly 500 rows, including individual products, product groups and services. No single row individually has a weight of more than one percent of the entire basket (the link above is directly to Eurostat. In the upper right, you can select goods and services and track changes in their weights).
In the latest version that we have presented to Eurostat, the weights of nearly two-thirds of the indicated rows are increased, but the dominant principle is that in them the price dynamics are significantly lower or negative. At the same time, although the weight of products and services that make up a smaller part of the table has been reduced, they themselves are far more widespread and society has a far higher sensitivity to their price dynamics.
For example, there is a decrease in the weight of food products - from 25.3 to 24%. Administratively determined prices weigh almost two percentage points less - from 18% to 16.1%. In both cases, the weights shrink when state policy leads to an increase in prices in the specific category. Bread is becoming more expensive by 20% due to the return of the VAT rate. The issuance of new identity documents is also becoming more expensive - by two-thirds. For all types of documents, for all types of service - standard or express. However, it turns out that according to the NSI, Bulgarians eat less bread as a share of their total consumption. As an example, the weight of pork in particular is also falling, and with one of the largest amplitudes in the last year.
In the circle of jokes, it can be assumed that after certain settlements in the Balkans were left without electricity during Christmas and New Year, this is sufficient reason for energy costs (for electricity, gas, solid fuels, and heating energy) to fall as a share of consumption with one of the largest amplitudes in the last 10 years. With a smaller amplitude, but still the weight of mineral fuels is also falling.
In general, it turns out that Bulgarians have spent more on computers, laptops and other equipment. However, their prices remain stable. Accordingly, increased consumption does not affect the general behavior of inflation.
It is a historical fact that the National Statistical Institute regularly changes the weights of products and services in the consumer basket. It can even be considered normal for the weight of some of the more expensive products to decrease. At least in theory, this shows their elasticity - if they become more expensive - people buy less of them. And vice versa.
However, there can be two explanations for the decrease in the weight of food - either there is mass affluence and consumption is growing towards investments and pampering, or a period of poverty sets in and people are now limiting themselves even in food purchases.
However, the dominant feeling does not indicate that either of the two processes is present. It is far more likely that, similar to the 1990s, the National Statistics is being used to calm public discontent. The latter may work for the purposes of Bulgaria's admission to the eurozone, but it does not contribute to establishing trust in official data. As Nobel laureate in economics Paul Krugman said, "When you're wondering whether to believe your eyes or the data, believe what you see."