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Price Index News: April 2008

1. Short stories

Tracking changes in digital cameras

The consumers price index (CPI) basket of representative goods and services is reviewed approximately once every three years to ensure it continues to reflect household purchases. This involves reviewing the composition and the relative importance of goods and services in the basket. The last CPI review was undertaken in 2006 and was implemented at the September 2006 quarter.

During a periodic review, the pricing specifications of the goods and services surveyed at retail outlets are also reviewed to ensure that surveyed varieties and sizes are representative of household purchases. Some pricing specifications are prone to becoming out of date between periodic reviews. Digital cameras are a good example, as they have been subject to rapid technology change. Tracking changes in digital cameras explains the CPI digital camera collection practices and examines whether the products being tracked for the CPI have remained representative of household purchase.

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2. Nuts and bolts

International practices for business price index calculation

Statistics New Zealand is progressively redeveloping a suite of business price indexes (BPIs) comprising the producers price index (PPI), the farm expenses price index (FEPI) and the capital goods price index (CGPI). As part of the redevelopment, New Zealand practice for various aspects of BPI compilation has been compared with the practices of five other Organisation for Economic Co-operation and Development (OECD) countries. International practices for business price index calculation looks at how BPIs are calculated in New Zealand and in the five other countries. International comparisons of other aspects of BPI compilation will be included in subsequent issues of Price Index News.

Insurance services in the consumers price index

Insurance services in the consumers price index (CPI) had an expenditure weight of 1.70 percent as at the June 2006 quarter. The sources and methods used to compile each of the insurance services are explained in Insurance services in the CPI.

The consumers price index basket

The consumers price index (CPI) measures the rate of price change of goods and services purchased by households. The CPI is calculated by tracking changes in the prices of a basket of 685 representative goods and services. Statistics New Zealand routinely publishes CPI indexes for 11 groups, 44 subgroups and 105 classes. Weighted average retail prices are also published for 44 selected food goods and services, and for 37 selected other goods and services.

The spreadsheet Consumers price index basket (within class) provides information about the types of goods and services within each of the 105 CPI classes.

For some goods and services in the CPI basket, prices are collected weekly (motor fuels and fresh fruit/vegetables). For others, prices are tracked monthly (for example, groceries) or quarterly (for example, household appliances).

Some goods in the basket are purchased predominantly during summer or during winter. For example, the CPI winter and summer seasonal surveys of these goods are conducted once a year, in the June quarter and the December quarter, respectively. Summer seasonal goods in the basket include summer clothing, footwear and sports equipment. These goods are priced only in December quarters because they have a limited supply and demand in other quarters. For some outdoor living equipment goods, such as barbecues, prices are collected not only in December quarters but also in March quarters.

Rented dwellings in the consumers price index

Actual rentals for housing had an expenditure weight of 6.87 percent of the consumers price index (CPI) as at the June 2006 quarter, making it the highest weighted class within the CPI. The sources and methods used to compile the actual rentals for housing index are explained in Rented dwellings in the CPI

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3. On the horizen

Excise duty date changes and increase for cigarettes and tobacco

The implementation dates of the annual indexation of excise duty on cigarettes and tobacco, and alcoholic beverages now take place on 1 January and 1 July, respectively. Previously, adjustments took effect on 1 December and 1 June.

The excise duty on cigarettes and tobacco increased by 1.887 percent on 1 January 2008 (not 1 December 2007, as reported in the previous issue of Price Index News). The later implementation dates mean that, in future, the impact on retail prices will be fully (or nearly fully) shown in the CPI in March quarters (tobacco) and September quarters (alcohol), rather than being spread over two quarters. Whether increases are fully shown in one quarter will, however, depend on the timing of price increases in stores and the timing of price collection by Statistics New Zealand staff.

Education fees

The CPI shows changes in tertiary education fees and changes in school fees, donations and uniform prices in the March quarter of each year.

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4. Development updates

Upcoming consumers price index review

A minor review of the consumers price index (CPI) will be implemented when the September 2008 quarter index is released in October 2008. The review will focus on reselecting and reweighting the basket of representative goods and services, using information from the 2006/07 Household Economic Survey (HES) and other sources.

Results from the 2007 HES were published on 30 November 2007.

The New Zealand household expenditure classification being used for the CPI was used for the first time in the HES for the 2006/07 survey. This will simplify the process of mapping HES expenditure to the CPI basket of representative goods and services.

The 2006 CPI review resulted in some significant relative changes in expenditure weights, which caused disruption to the annual trimmed mean and weighted percentile measures during the transition across the June 2006 quarter reweight.

Statistics New Zealand made two sets of annual trimmed mean and weighted percentile measures available during the transition across the June 2006 quarter reweight – one based on June 2002 quarter weights and one based on June 2006 quarter weights. We are investigating whether it is feasible to adopt an alternative methodology that would avoid potential disruption of the type that occurred in 2006. The alternative being considered is to compile the quarterly trimmed mean and weighted percentile measures using seasonally adjusted basket movements, and then deriving the annual trims directly from the quarterly trims.

Recent review work has focused on reselecting the basket of goods and services, and reviewing the pricing specifications of the products being tracked to ensure they remain representative of household purchases. Price collection has commenced for basket additions that are being tracked monthly or weekly, and will start in the June 2008 quarter for basket additions that will be tracked quarterly. Prices will continue to be collected until the June 2008 month and quarter for goods and services that will be removed from the new basket.

For further information on aspects of the 2008 CPI review please contact:

Chris Pike
Wellington 04 931 4600
Email: info@stats.govt.nz

Labour cost index review

Statistics New Zealand is undertaking a labour cost index (LCI) review project. The LCI measures changes in wage rates and non-wage labour costs.

The reweight will help to ensure that the LCI continues to reflect the current labour market. The 2006 Census is a key data source for the reweight, as was the 2001 Census for the previous reweight in 2002. Other important data sources to be used include Statistics New Zealand's Business Frame (a register of New Zealand businesses), the labour cost survey and the quarterly employment survey (QES).

The new expenditure weights will be assigned at the sector of ownership (based on whether the organisation is owned privately, by central government or local government), by industry group and occupation level. The expenditure weights will reflect both the number of jobs filled by paid employees, and the pay rates for those jobs.

The first reweighted indexes will be released for the September 2008 quarter (wage and salary rates) and the June 2009 quarter (non-wage labour costs). The reweight will be based on the existing LCI sample and the existing industry and occupation groups.

Following the reweight using the existing classifications, we plan to implement more up-to-date industry (Australian and New Zealand Standard Industrial Classification 2006) and occupation (Australian and New Zealand Standard Classification of Occupations) classifications in the LCI. The new industry and occupation classifications are structured differently to the existing classifications used in the LCI, and the LCI sample will be refreshed to ensure it adequately represents the new classification structures. First LCI results using the new classifications are expected to be included in the September 2009 quarter information release. First QES results using the new industry classification should be released at about the same time.

Recent work on the review has focused on reviewing the sectors of ownership and industries that survey respondents are classified to, and on compiling 2006 Census and associated information at the industry by sector of ownership level for macro- and micro-analysis (to ensure fitness for use in reweighting the LCI).

If you would like to be kept informed of progress on the LCI review, please contact:

Adam Dustin
Wellington 04 931 4600
Email: info@stats.govt.nz

Update on the business price index redevelopment

As mentioned earlier, Statistics New Zealand is progressively redeveloping a suite of business price indexes comprising the producers price index (PPI), the farm expenses price index (FEPI) and the capital goods price index (CGPI). This note provides an update on recent progress.

Redevelopment is now underway on the following industries: agriculture (including FEPI); heavy/civil construction and construction trade services; petroleum, coal and basic chemical manufacturing; rubber, plastics and other chemical manufacturing; non-metallic mineral product manufacturing; prefabricated building, furniture and other manufacturing; real estate and other property services; hiring and leasing; accounting and legal services; water transport and other transport/storage services; retail trade; wholesale trade; scientific research and technical services; and cultural and recreational services. Current redevelopment provides further information about the project and progress to date.

Redevelopment is provisionally complete for finance and insurance and for computer services. The new indexes will be implemented in the PPI once they have been thoroughly tested.

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5. Making contact

In future issues of Price Index News, we will use this section to let you know about:

  • plans to consult users of price index statistics
  • the availability of consultation papers
  • how users of price index statistics can participate in the consultation process
  • resulting decisions made after users have been consulted.

If you would like to discuss any aspect of price index statistics, we would like to hear from you. Contact names are at the end of the commentary of each Hot Off The Press information release. In addition, you can contact:

John Morris (Manager – Prices)
Litia Tapu (Project manager – Business, Labour and Overseas Trade Price Index outputs)
Patricia Jennings (Project manager – Business Price Index development)
Daniel Griffiths (Project manager – Consumers Price Index outputs)
Chris Pike (Project manager – Consumers Price Index/Labour Cost Index development).

Wellington 04 931 4600
Email: info@stats.govt.nz

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6. Release dates

Price index release calendar for the next three months

M = Media conference

April 2008

Tue 15 M Consumers Price Index: March 2008 quarter
Food Price Index: March 2008

May 2008

Mon 5 M Labour Cost Index (Salary and Wage Rates): March 2008 quarter
Tue 13 Food Price Index: April 2008
M Producers Price Index: March 2008 quarter
Fri 16 Capital Goods Price Index: March 2008 quarter

June 2008

Wed 11 M Overseas Trade Index (Prices): March 2008 quarter (provisonal)
Overseas Trade Index (Volumes): March 2008 quarter (provisional)
Thu 12 Food Price Index: May 2008
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