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Price Index News: April 2011

1. Short stories

Tracking milk prices in the CPI

Tracking milk prices in the CPI looks at retail milk prices from the 1890s to February 2011.

Running hot and cold: tracking non-alcoholic beverage prices in the CPI

Running hot and cold: Tracking non-alcoholic beverage prices in the CPI looks at how non-alcoholic beverage prices have changed over the past three decades. Soft drinks and fruit juice have decreased in price relative to the overall food group price index while coffee, tea, and drinking chocolate prices have increased roughly in line with food prices.

Retail fish prices, 2005–10

Retail fish prices, 2005–10 tracks the prices of fresh fish sold in supermarkets and fish shops from 2005–10. In 2010, hoki ($13.31/kg) and red cod ($16.10/kg) prices might have caught the eye of the budget-conscious shopper, while buyers of snapper and blue cod had to dig a little deeper, paying on average $37.87 and $34.57 per kilogram, respectively.

Impact of GST rise on prices collected for the CPI

The rate of goods and service tax (GST) rose from 12.5 percent to 15.0 percent on 1 October 2010. The impact of the rise in GST on individual prices collected for the consumers price index in the months following the increase is discussed in Impact of GST rise on prices collected for the CPI.

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2. Working with others

Purchasing power parity programme 2008 results

Cross-country comparisons of economic data are often based on market exchange rates. While the calculation is straightforward, the results can be misleading in particular analyses, such as those that relate to material well-being, consumption, or volumes of economic activity. For meaningful comparisons, purchasing power parities (PPPs) are needed. PPPs are calculated for over 50 countries by the Statistics Office of the European Union (Eurostat) and the Organisation for Economic Co-operation and Development (OECD).

Detailed 2008 benchmark results are now available on the OECD.Stat website. Detailed results are also available for the 2005 benchmark year. More recent PPP results, calculated using the 2008 benchmark results and more recent country gross domestic product (GDP) and consumers price index information can be found on the OECD website and on OECD.Stat.

In addition to the release of the 2008 benchmark results, the OECD has published '2008 Benchmark PPPs: Measurement and Uses - Statistics Brief No. 17, March 2011'. The statistics brief provides some background on PPPs, including their construction and application, and presents the new benchmark PPPs for 2008, produced as part of the Eurostat-OECD PPP programme. The brief also describes some methodological changes that have been introduced since the last benchmark PPPs in 2005 regarding the measurement of health and education services. Finally the brief presents some information on PPPs in a temporal context, in particular how PPP-converted GDP series behaved during the recent global financial crisis.

New Zealand is one of 54 countries participating in the OECD-Eurostat PPP programme. The programme publishes results for three-yearly benchmark years. The most recent benchmark is the 2008 year, with the data collection nearing completion for the 2011 benchmark.

Ottawa Group 2011 meeting

Statistics New Zealand is hosting the 12th meeting of the United Nations International Working Group on Price Indices (known as the Ottawa Group) on 4–6 May 2011. The Ottawa Group is an international research forum for consumer price index (CPI) specialists. In May, more than 30 experts will travel to Wellington from around the world to share experiences and discuss research into measuring price change.

The Ottawa Group met for the first time in Ottawa in 1994, which led to the group's name. The group meets approximately every two years; this is the first time the meeting has been held in New Zealand.

The 2011 meeting in Wellington is organised into six discussion sessions on different topics. Attendees have submitted papers on their latest research relevant to the topics. The topics for the 2011 meeting are:

  • Scanner data: issues, methods, practice
    Papers in this session focus on using scanner data to compile CPIs and discuss different calculation methods for index aggregation when using scanner data, and explore countries' experiences with scanner data.

  • Price measurement for 'difficult to measure' products and services
    Papers focus on specific problem areas for CPI compilation, including measuring price change for telecommunication services, financial intermediation services indirectly measured (FISIM), second-hand cars, and housing rentals. Hedonic price measurement is also covered.

  • Housing and residential property price indices
    The third draft of the Eurostat Handbook on Residential Property Price Indices will open this session. Papers complementing the handbook, and others discussing different approaches to measuring house price change, are also part of this session.

  • Developments in weighting and calculation methodology
    Papers cover index compilation methods and sample design.

  • Intranational and international comparability and international comparisons
    This session will include a paper on an econometric approach to constructing consistent panels to measure purchasing power parities and real incomes, and a paper discussing lessons learnt when comparing CPIs across Pacific island states.

  • Emerging issues in price indices
    Papers cover a range of topics including seasonal adjustment and price dynamics in external trade.

Papers submitted so far are available on the agenda tab of the Ottawa Group 2011 website. We expect all papers to be posted by mid-April 2011.

Registered attendees include representatives from 20 national statistical offices and international organisations, and 10 researchers or other international experts. International organisations attending the meeting include Eurostat (statistical office for the European Union), the International Monetary Fund, the International Labour Organization (ILO), and the European Central Bank.

This meeting is a great opportunity for Statistics NZ to help facilitate an international exchange of ideas and new research into price indexes.

The Ottawa Group's main focus is on measuring consumer price change. Another international forum for discussion of price indexes is the Voorburg Group, which focuses on research related to the production of service statistics, including measurement of price change. The ILO and UN Economic Commission for Europe jointly host regular international meetings on price indexes. Together, these meetings provide forums for international discussion, and increase international cooperation in developing international standards and best practice methods for price indexes.

For further information see the Ottawa Group 2011 website or contact:

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

CPI adjustment to New Zealand Superannuation and benefit rates

The consumers price index (CPI) is used to adjust a host of Work and Income payments, including New Zealand Superannuation and veteran’s pension; benefits for unemployment, sickness, and domestic purposes; student allowances; and working for families tax credits for each child. A CPI adjustment is also made to the income thresholds for eligibility for childcare assistance and the accommodation supplement; income limits for the disability allowance; and income cut-off points for the Community Services Card.

On 1 April 2011, New Zealand Superannuation rates, student allowances, and welfare benefit rates increased by 3.75 percent. This increase was based on the percentage change in the CPI all groups from the December 2009 quarter to the March 2010 quarter, and the percentage change in the CPI 'all groups less cigarettes and tobacco subgroup' from the March 2010 quarter to the December 2010 quarter. In addition to the CPI adjustment, New Zealand Superannuation and veteran’s pension rates were further adjusted to raise them to 66 percent of the net average weekly wage – giving a total increase of 6.85 percent for the married couple rate. For more details, see the Work and Income website.

The overall percentage change of a 3.75 percent increase was calculated by linking the 'all groups' and 'all groups less cigarettes and tobacco subgroup' series at the March 2010 quarter. A 'Benefit indexation table' showing the calculation of the 3.75 percent increase is included in the 'Available files' section of the Consumers Price Index: December 2010 quarter information release.

Adjustments made to New Zealand Superannuation rates and welfare benefit rates on 1 April 2012 and 1 April 2013 will be based solely on percentage changes in the CPI 'all groups less cigarettes and tobacco subgroup'.

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3. Nuts and bolts

Health in the CPI

The health group had a combined expenditure weight of 5.09 percent in the consumers price index (CPI) at the June 2008 quarter. The sources and methods used to compile the health group of the CPI are explained in Health in the CPI.

Updating the CPI used cars index hedonic model

In the June 2011 quarter, Statistics New Zealand will implement an improved hedonic formulation for the second-hand motor cars (or used cars) component of the consumers price index (CPI). Updating the CPI used cars index hedonic model explains the changes being made.

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4. On the horizon 

Excise duty increase for cigarettes and tobacco

The annual indexation adjustment of the excise duty on cigarettes and tobacco occurred on 1 January 2011. The adjustment was an 11.64 percent increase in the excise duty. The increase was based on a 1.644 percent increase in the 'CPI less credit services' index from the September 2009 quarter to the September 2010 quarter and the second of three 10 percent increases, as set out in the Excise and Excise-equivalent Duties Table (Tobacco Products) Amendment Act 2010.

The impact on retail prices should be fully shown in the CPI for the March 2011 quarter, depending on the timing of price increases in stores, and the timing of price collection by Statistics NZ staff.

The excise rate for cigarettes is now 38.614 cents per cigarette, up from 34.587 cents per cigarette. In the December 2010 quarter, a packet of 25 cigarettes cost around $15.02, of which $8.65 (around 65 percent of the packet price before GST is added) was the excise duty.

Education fees in the CPI

In the March quarter of each year, the CPI shows changes in:

  • tertiary education fees
  • adult and community education fees
  • school fees, donations, and uniform prices.

Early childhood education funding changes

Early childhood education prices are collected each quarter for inclusion in the CPI. From 1 February, funding arrangements for centres changed. The previous funding rates for centres with 80 to 99 percent, and 100 percent, teacher registration were replaced with new '80 percent plus' funding rates. For example, funding rates for 20 Hours ECE provided by all-day, teacher-led, centre-based services were $12.73 per funded child hour for centres with 100 percent registered teachers, and $11.78 for centres with 80 to 99 percent registered teachers. Both rates fell to $11.12.
 
The funding rate changes do not affect sessional kindergartens, kōhanga reo, playcentres, and home-based services. Nor do they affect all-day, teacher-led, centre-based services where up to 79 percent of teachers are registered.

According to the Ministry of Education, at least 2,300 services with 86,400 enrolments are not affected by funding rate changes. This includes all sessional kindergartens, most kōhanga reo, playcentres, and home-based services. At May 2010, around 2,000 services were funded for 80 percent or more registered teachers, with 92,800 children being enrolled in these services. Of the 2,000 services, 760 were receiving funding for having 100 percent registered teachers.

Impact of GST rise on the CPI

The GST rate rose from 12.5 percent to 15 percent on 1 October 2010. Lifting GST to 15 percent could increase retail prices of goods and services that are subject to GST by 2.22 percent. For example, a product priced at $100 (excluding GST) would have sold for $112.50 before 1 October. With GST increased to 15 percent, that product would retail for $115 (all other things being equal), which gives an increase of 2.2 percent.

The rise in GST was not immediately reflected for some seasonally available goods and services in the CPI basket. The rise will be reflected when prices for these items are next collected. For example, education fees will next be collected in the March 2011 quarter, rugby game admission in the March 2011 and September 2011 quarters, and prices for winter seasonal clothing in the June 2011 quarter. These items make up about 3 percent of expenditure on goods and services in the CPI. Of this expenditure, nearly half will be shown in the March 2011 quarter, nearly half in the June 2011 quarter, and the remainder will be shown in the September 2011 quarter.

Alternative way to access Price Index News articles

Four links are available on the Price Index News home page:

These links will take you to an archive of articles from past issues of the newsletter. To find previous CPI ‘Nuts and bolts’ articles, click on the ‘Nuts and bolts’ link, then click ‘CPI sources and methods’. The articles are divided according to the 11 CPI groups.

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5. Development updates

Upcoming consumers price index review

A review of the consumers price index (CPI) will be implemented when the September 2011 quarter CPI is released in October 2011. The focus of this review is to reselect and reweight the basket of representative goods and services used to calculate the CPI. The review will make use of information from the 2009/10 Household Economic Survey (HES) and other sources. Results from the 2009/10 HES were published on 25 November 2010.

The previous CPI review used information from the 2006/07 HES and was implemented when the September 2008 quarter was released in October 2008.

The latest review will help ensure that the CPI basket of goods and services remains representative of New Zealand private resident household purchases.

As part of this review, we are considering the information we make available for the CPI and the food price index (FPI). This includes the tables we publish with each information release and on Infoshare. More information on this review, and details on how to make submissions, can be found under the 'Making contact' section below.

The reweighted FPI will be published for the July 2011 month on 25 August. The reweighted CPI for the September 2011 quarter will be released on 25 October. An information paper about the review, including the new set of CPI weights and details of basket changes, will be released in early October 2011.

For more information on the 2011 CPI review, please contact:

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

Implementing ANZSIC06 in the producers price index

The 2006 version of the Australian and New Zealand Standard Industrial Classification (ANZSIC06) will be implemented in the producers price index (PPI) in the March 2011 quarter, for release on 18 May 2011.

Industry publication level

The PPI will be published under ANZSIC06 using the New Zealand Standard Industrial Output Categories (NZSIOC) classification structure. The intended PPI publication level will be level 3 of the NZSIOC classification, although this is subject to an assessment of confidentiality and data quality. The PPI will be compiled using the most detailed level of the NZSIOC classification (level 4), which has 118 distinct industry groupings.

Further details of the NZSIOC classification are available in the NZSIOC classifications – Tables.

Weight reference period

As part of implementing ANZSIC06 in the PPI, Statistics NZ has taken the opportunity to update the weights of the commodities that underlie the industry indexes. Commodity weights for the year ended March 2008 were used in this process. These weights were sourced from the New Zealand System of National Accounts.

Price reference period

The price reference period for the ANZSIC06-based PPI will be the December 2010 quarter.

Index reference period

The index reference period for the ANZSIC06-based PPI will be the December 2010 quarter (=1000). The choice of reference period for an index is arbitrary. What is important is the percentage movement in the indexes, and these movements are unaffected by the choice of index reference period.

Backcasting

The existing ANZSIC96-based PPI series will be used to provide analytical back series for the new ANZSIC06-based PPI series. The series to be backcast will include all the published industry indexes. This will produce back series as far back as the ANZSIC96-based PPI series are available (to the June 1994 quarter). The back series will be linked to the directly calculated ANZSIC06-based series, at the December 2010 quarter.

Series references

The ANZSIC06-based PPI series will have new series references, which will have the following pattern:

PPI outputs (PPIQ.SQU*)
PPI inputs (PPIQ.SQN*)

The * will show the NZSIOC industry codes.

Implementing ANZSIC06 in the Retail Trade Survey deflators

Statistics NZ recently completed the redevelopment of the Retail Trade Survey (RTS) deflators. These deflators measure changes in the prices of goods and services sold by businesses in the industries published in the RTS. The deflators are used to remove the effect of price change, which allows change in the volume of retail sales to be estimated.

Each industry’s deflator consists of a 'basket' of indexes, drawn mainly from the consumers price index (CPI). The CPI indexes and other indicators in each deflator's basket represent the goods and services sold by the industry. Each of the goods or services is weighted to reflect the relative importance of the mix of goods and services sold by the industry.

In 2010, the RTS was redesigned to reflect the updated industrial classification, the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06). The new deflators were developed to deflate estimates of retail sales in current prices from the redesigned RTS.

The weights of the new deflators are based mainly on information used in the 2008 consumers price index review, including household spending patterns by industry, that were originally reported in the 2006/07 Household Economic Survey.

For more information, please see the Technical notes of the Retail Trade Survey: December 2010 quarter information release. The new deflator regimens and weights are in table 18 of the Excel spreadsheet, under 'Available files'.

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6. Making contact

Consumers price index and food price index output review

Statistics NZ will implement its 2011 review of the CPI in October 2011. As part of this review, we are considering the information we make available for the CPI and food price index (FPI) in the tables published with each information release, and on Infoshare.

We are inviting public submissions on the information we make available for the CPI and FPI. We would particularly appreciate feedback on the suitability of the information currently provided, the way in which it is provided, and any improvements or changes you would like made.

CPI and FPI output review shows what is currently available for the CPI and FPI.

Submissions should be sent to info@stats.govt.nz with "CPI review" in the subject line by Friday, 6 May 2011. Alternatively, please contact Cary Milkop on (04) 931 4600 if you would like to provide comment over the phone (or arrange to meet, if you are based in Wellington).

 

Contact people

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' section in each information release. You can also contact:

  • Chris Pike (Manager – Prices)
  • Litia Tapu (Project manager – Business, labour, and overseas trade price index outputs)
  • Daniel Griffiths (Project manager – Consumers price index outputs)
  • Peter Campion (Acting project manager – Index development).

 

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

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7. Release dates

Price index release calendar for the next three months

M = Media conference

April 2011

Wed 13 Food Price Index: March 2011
Mon 18 M Consumers Price Index: March 2011 quarter

 

May 2011

Tue 3 M Labour Cost Index (Salary and Wage Rates): March 2011 quarter
Thu 12 Food Price Index: April 2011
Wed 18 M Producers Price Index: March 2011 quarter
Wed 18 M Capital Goods Price Index: March 2011 quarter
 
June 2011
 
Wed 1 M Overseas Trade Indexes (Prices): March 2011 quarter (provisional)
Wed 1 M Overseas Trade Indexes (Volumes): March 2011 quarter (provisional)
Tue 14 Food Price Index: May 2011

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