Misleading report by ST on inflation

A highly misleading article from the ST, portraying that the more well-off would be far more affected by inflation than less well-off was reported this morning. This is as good as a public lie. Sometimes I feel that some journalists smell as bad as the politicians they try to bootlick.

Inflation hit three-year high of 5.2% last year
Well-off bear biggest brunt of the price increases, figures show

Inflation surged to a three-year high of 5.2 per cent last year, driven by the higher costs of owning a car and steep rents. -- ST PHOTO: CAROLINE CHIA

Inflation surged to a three-year high of 5.2 per cent last year, driven by the higher costs of owning a car and steep rents.

But not all income groups felt the effects uniformly, with the well-off feeling the brunt of rising prices more, the Department of Statistics (DOS) said on Wednesday. Last year, the top 20 per cent of income earners were hit by an inflation rate of 5.7 per cent - much higher than the 4.7 per cent for the bottom 20 per cent of households.

But the difference is far sharper if the cost of renting a home is stripped out. More than 87 per cent of Singaporeans owned their homes in 2010 and do not pay rent. Minus the cost of rentals, the lowest 20 per cent of households had inflation of just 2.2 per cent, less than half the rate experienced by the top 20 per cent.

Minus the cost of rentals? But isn't the bottom 20% more likely to be renting out flats rather than buying homes because of their financial status? By removing this are you not skewing the stats deliberately to make it look as if the poor are not as badly affected, then claim the poorest of the poor is not having it as bad as the filthy rich?

Helloooo??? Did I must something here?

Now here's the misleading part. In the link above, there is a column titled "Background Story". Read what it says before I tell you where the misleading part is. I reproduce it below for those who are too lazy to visit ST's actual webpage, or if the link I gave expires. Here it is:

New gauge takes out accommodation cost

A NEW indicator that throws more light on the level of inflation was unveiled by the Department of Statistics (DOS) yesterday.

The number strips out imputed rents on owner-occupied accommodation (OOA) from the overall consumer price index (CPI) compilation.

Imputed rent is typically calculated to reflect how much a household would have to pay if it were renting the home, based on market rates.

It is the only non-cash item in the basket of data used to compile the CPI, so by stripping it out, the index can more accurately reflect households' actual expenditure.

As of 2010, around 87.2 per cent of households own their homes and therefore do not need to pay rent.

The DOS said in a statement yesterday that the 'changes in the CPI-imputed rentals on OOA... have no direct impact on the monthly cash expenditure of most households in Singapore'.

This latest indicator - CPI less imputed rentals on owner-occupied accommodation - was 4.3 per cent higher last month compared with the same month a year before that.

The DOS also compiles the overall, or headline, inflation figure. The figure for last month was 5.5 per cent.

Apart from this headline figure, the DOS calculates a CPI figure excluding accommodation costs. That means it excludes the non-cash item - imputed rentals - as well as other items such as maintenance fees, which are paid out in cash.

Accommodation cost was the single largest driver of headline inflation last month.

The Monetary Authority of Singapore and the Ministry of Trade and Industry said in a joint report that the increase in accommodation cost 'reflected the sharp rise in imputed rentals on owner-occupied accommodation'.

Compiling an indicator for CPI less accommodation helps to strip out volatility.

This volatility arises due to the rebates for service and conservancy charges that are given to households living in HDB flats, at different times of the year.

The Monetary Authority of Singapore also compiles a core, or underlying, inflation number that strips out accommodation and private road transport. The core inflation stood at 2.2 per cent for the year.

For the whole of last year, the rise in CPI less imputed rentals on owner-occupied accommodation was 4.2 per cent. The overall CPI was 5.2 per cent.

MELISSA TAN

Here is a screenshot of the tabulation given by ST in their link found in their webpage. The link is here. CPI RISE FROM 2010 TO 2011. The screenshot is found below.


Still unable to find where the misleading part is? Don't blame you. It is so well crafted, you have to go through it with a fine-tooth comb to see the lie ST puts up.

For those who still can't see it, I'll walk through this stuff with you.


Walkthrough -

1. First, ST reports that the upper income earners experience a higher rate of inflation than the lower income earners. Then ST reports that the gap is greater if cost of rentals is stripped out. (But why should this even be stripped out when the biggest cost to low income earners is housing costs due to rental costs?)

2. Next they try to give you a "Background Story" and by doing so, conflate two different issues, which are: 1) actual cost of rental experienced by low income earners, and; 2) imputed rentals which a home owner would have to pay, based on the assumption that is the rental amount he has to pay, if he were to pay rent for that home he resides in.

3. I know #2 sounds confusing. But what it means is that if the homeowner does not own his home, it is assumed he would have to pay rent for that house. That's what is being stripped out from the calculation of the CPI. Rightly so. He doesn't need to pay that rent, hence, why should it be considered as part of the calculation in the first place?

4. ST on the other hand is trying to say if actual rental costs paid by low income owners is stripped off, the lowest income earners would have an even lower CPI and hence, making the CPI gap between highest and lowest income earners even greater than it already is - meaning the highest income earners would be "suffering" even much more than lower income earners now!

5. But isn't the rental paid mostly by low income earners actual costs and should therefore remain as part of CPI calculation - as rightly is being done so now, as can be seen from the screen shot above? The actual rental costs is under "Housing".

6. Imputed rent, which has been truly stripped off (the red row in the screenshot above) is a non-cash item because it is based on assumption that the homeowner pays rent, if he were not the owner of that home.

7. So while the imputed rent has been rightfully stripped off, ST tries to confuse readers that housing costs, which is the highest for low income earners, if stripped off, would mean the rich would "suffer even much more" than the poor now. But why should that be the case? Trying to fudge some figures there, ST?

8. Note the very misleading statement by ST in the "Background Report" -

Apart from this headline figure, the DOS calculates a CPI figure excluding accommodation costs. That means it excludes the non-cash item - imputed rentals - as well as other items such as maintenance fees, which are paid out in cash.

Accommodation cost was the single largest driver of headline inflation last month.

Now take a look at the figures in the screenshot above. Isn't the single largest driver for low income earners "housing"?

So isn't ST trying to confuse readers that the imputed rentals (which has been stripped off) is the same as "housing", by lumping both items as "accommodation"?

Isn't ST trying to confuse you that since it is justified to remove imputed rentals, it is also justified to remove housing, because both are accommodation?

9. The Dept of Stats, Min of Trade and Industry and MAS all agree that imputed rentals should not figure in the calculation. That is a step in the right direction. It shouldn't be there in the first place. But why is ST trying to infer that all accommodation costs (including actual rent paid) also be removed?


My Summation and Views -

To the poorest of the poor, housing (in terms of rent) is the biggest cost. ST tells us if that is removed, it doesn't look so bad for the poor guys.

ST then tries to confuse readers by conflating two different items, which are actual rent paid by the lowest income earners with imputed rentals the very rich would have to pay if they paid rent on the residence they are living in.

This is journalism that stinks so bad, even the stray dog in my neighbourhood would die of a heart attack if it smelled the stench from the misleading ST report.