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Price Index News: April 2013

1. Short stories

Tracking modern conveniences in the home

Tracking modern conveniences in the home looks at the major household appliances tracked in the consumers price index (CPI) from 1949 to 2012. When washing machines were added to the CPI basket in 1949, they cost about £60 – equivalent to $4,170 today after allowing for general inflation.

New Zealand's seafood industry

New Zealand's fishing industry (and the related infographic) gives an overview of selected parts of the New Zealand seafood industry. They highlight what we catch, the retail prices we pay, the export value of major species, and their main export destinations.

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2. Working with others

Copenhagen hosts 13th Ottawa Group in May 2013

The 13th meeting of the United Nations International Working Group on Price Indices will be held in Copenhagen on 1–3 May 2013. More than 50 experts in price measurement will attend to share experiences and discuss research into measuring price change.

The group meets every two years in a different location, and is known as the Ottawa Group because the first meeting in 1994 was held in Ottawa. Statistics New Zealand hosted the 12th meeting in Wellington, in 2011.

A variety of topics will be discussed in 2013, with sessions on:

  • housing price indexes
  • commercial property indexes
  • measuring service prices
  • sampling and data collection
  • 'difficult to measure' goods and services
  • seasonal adjustment and analytical series
  • real-time estimations of superlative indexes
  • international comparability of price developments and price levels.

Prices' senior researcher Frances Krsinich will attend the meeting on behalf of Statistics NZ. She will present a paper that discusses using a new method for calculating quality-adjusted price indexes, when explicit information on product characteristics is not available.  The paper is titled ’Using the rolling year time product dummy method for quality adjustment in the case of unobserved characteristics.’ 

Joint work between Statistics NZ and Statistics Netherlands will also be presented at the meeting. Jan de Haan and Frances Krsinich’s paper, ‘Scanner data and the treatment of quality change in rolling year GEKS price indexes', discusses a recently developed method for fully quality-adjusting price indexes from scanner data – when there is product characteristic information in the data. This approach was tested on New Zealand consumer electronics data. The research gave us important insights into the potential that scanner data has to help produce New Zealand’s consumers price index.

Papers submitted so far are available on the agenda tab of the Ottawa Group 2013 website.

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3. Nuts and bolts

Recreational and sporting services in the CPI

Recreational and sporting services in the CPI explains the sources and methods used to compile the recreational and sporting services class of the consumers price index (CPI). This class had an expenditure weight of 0.93 percent at the June 2011 quarter.

Personal care in the CPI

Personal care in the CPI explains the sources and methods used to compile the personal care subgroup of the consumers price index (CPI). This subgroup had an expenditure weight of 2.37 percent at the June 2011 quarter.

How electricity price changes are measured in the CPI

How electricity price changes are measured in the CPI explains the sources and methods used to compile the electricity class of the consumers price index (CPI). This class of the CPI had an expenditure weight of 3.91 percent at the June 2011 quarter.

Telecommunication equipment and services in the CPI

Telecommunication equipment and services in the CPI explains the sources and methods used to compile the telecommunication equipment and services components of the consumers price index (CPI). These components of the CPI had a combined expenditure weight of 3.35 percent at the June 2011 quarter.

Domestic and international air transport in the CPI

Domestic and international air transport in the CPI explains the sources and methods used to compile the domestic and international air transport classes of the consumers price index (CPI). The passenger transport services subgroup of the CPI had an expenditure weight of 2.92 percent at the June 2011 quarter.

4. On the horizon

Excise duty increase for cigarettes and tobacco

Each year, the government adjusts excise duty on cigarettes and tobacco. The latest update was on 1 January 2013, when excise duty increased 10.86 percent. The increase was based on a 0.86 percent rise in the 'CPI less credit services' index between the September 2011 and September 2012 quarters. The 1 January rise also included a fourth successive 10 percent increase – as set out in the Excise and Excise-equivalent Duties Table (Tobacco Products) Amendment Order 2012.

The consumers price index (CPI) for the March 2013 quarter (released 17 April) will show how the excise increase affected retail prices for cigarettes and tobacco. The price change shown in this quarter’s CPI should fully reflect the excise increase, depending on the timing of price rises in stores and when Statistics NZ staff collected prices.

The excise duty is now 49.011 cents a cigarette, up from 44.210 cents a cigarette in 2012.

In the December 2012 quarter, excise duty made up more than two-thirds ($11.05) of the price of a packet of 25 cigarettes (before GST). A packet of 25 cigarettes cost $18.45 (including GST) in that quarter.

 Excise duty increases for cigarettes and tobacco
 Date

Excise duty
(cents per cigarette)

Increase
(percent)

1 Jan 2009

30.955

1 Jan 2010

31.443

1.58

29 Apr 2010

34.587

10.00

1 Jan 2011

38.614

11.64

1 Jan 2012

44.210

14.49

1 Jan 2013

49.011

10.86

Note: on 29 April 2010, excise duty on cigarettes rose 10 percent, while excise on tobacco rose 25.4 percent (tobacco first increased 14 percent and then another 10 percent).
Symbol: … not applicable
Cigarette and tobacco prices increased 13 percent between the December 2011 and December 2012 quarters. This includes the excise duty increase in January 2012.

Prescription charge increase for pharmaceutical products shows in CPI

For pharmaceutical products, we collect prices on prescription medicines, oral contraceptives, and over-the-counter products such as painkillers, cough and cold preparations, sunscreen, and vitamins.

For the March 2013 quarter, the CPI will reflect the increase in prescription charges that came into effect on 1 January 2013. These charges are paid for prescription medicines and oral contraceptives.  On 1 January 2013, the charge increased from $3 to $5 an item for fully subsidised medicines, other than for children under six years whose prescriptions are still free.

For partly subsidised medicines, consumers now pay a prescription charge (or ‘patient co-payment’) of $5, plus a manufacturer’s surcharge.

For the CPI, we include prescription charges for a sample of prescription medicines for adults and children. The samples selected are based on information from the New Zealand Health Information Service and Pharmac.

See Health in the CPI for more about the sources and methods used to compile the pharmaceutical products class.

Education fees in the CPI

In the March quarter CPI of each year, which coincides with the start of the academic year, we show price changes in:

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

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5. Development updates

Annual update of producers price index weights

We update the producers price index (PPI) industry and commodity weights annually to help maintain the relevance of this index. The weights come from the supply and use table (SUT) produced annually as part of the New Zealand System of National Accounts.

The weights associated with both the commodities (approximately 300 are used in the SUT) and the weights attached to each industry are being updated. These updates will reflect changes in economy-wide income and expenditure, in particular the mix of products and the mix of industries. We are re-weighting the industries at the New Zealand Standard Industry Output Categories (NZSIOC) level 4 and above (there are 118 level 4 industries).

New weights that will be introduced in the March 2013 quarter come mainly from the 2009/10 SUT. These weights will apply from a new price reference period of the December 2012 quarter, and will be used to weight price movements from the December 2012 quarter to the March 2013 quarter.

In addition to the annual re-weight, we are updating the lower level commodity indexes and product samples as part of the business price index rolling review process, outlined under ‘Reviewing the business price indexes’ section below.

Reviewing the business price indexes

Statistics NZ is undertaking a rolling review of the business price indexes – the producers price index (PPI), the farm expenses price index (FEPI), and the capital goods price index. The review has two objectives: to maintain the relevance of these indexes and to collect commodity data for use in the national accounts.

We are surveying a sample of economically significant enterprises operating in New Zealand, to collect information on their supply and use of goods and services (commodities). We use information from the commodity data collection to balance the production and expenditure estimates of gross domestic product (GDP) within an input-output framework. Doing this requires us to compile tables that detail the supply and use of commodities, by industry.

We also use this commodity information, by industry, to establish lower-level weights for the business price indexes. These are used as deflators in producing a chain-volume measure of GDP.

We carried out the previous PPI redevelopment from 2004 to 2010. The current rolling review is the first to use the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06). As part of the review, the ANZSIC06 industries have been prioritised. We are reviewing industries on six-year cycles for most of them, and on either three-year or 12-year cycles for the remaining industries.
 
Currently, we are reviewing these industries:

  • primary metal and metal product manufacturing 
  • fabricated metal product manufacturing
  • printing
  • publishing
  • agriculture (including FEPI
  • electricity, gas, and water
  • telecommunication services
  • Internet service providers and data processing services
  • computer system design and related services
  • forestry and logging
  • aquaculture 
  • fishing
  • hunting and trapping
  • agriculture, forestry, and fishing support services
  • petroleum and coal product manufacturing
  • basic chemical and basic polymer manufacturing
  • fertiliser and pesticide manufacturing
  • pharmaceutical, cleaning, and other chemical manufacturing
  • meat and meat product manufacturing
  • seafood processing
  • dairy product manufacturing
  • fruit, oil, cereal, and other food product manufacturing
  • beverage and tobacco product manufacturing
  • transport equipment manufacturing
  • electronic and electrical equipment manufacturing
  • machinery manufacturing
  • rail transport
  • water transport
  • air and space transport
  • scenic and sightseeing transport.

To date, we have used updated commodity proportions to help balance the production and expenditure estimates of GDP for the following industries:

  • primary metal and metal product manufacturing
  • fabricated metal product manufacturing
  • printing
  • publishing.

When the national accounts industry benchmarks are published in November 2013, updated commodity proportions will have been used to help balance the production and expenditure estimates for other industries. To date these include:

  • petroleum and coal product manufacturing
  • fertiliser and pesticide manufacturing
  • electricity and gas.

We have updated higher-level PPI commodity weights for both the printing, and publishing industries, based on information from the commodity data collection. This update was implemented through the annual PPI weight update, which took place for the March 2012 quarter.

We will implement lower-level PPI commodity weights and updated product samples for the printing, and publishing industries for the March 2013 quarter PPI (published 17 May 2013), and for the primary metal and metal product manufacturing, and fabricated metal product manufacturing industries for the June 2013 quarter PPI (published 19 August 2013).

For more information about the rolling business price index review, please contact:

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

Progress with the CPI rolling review of retail outlets

Our ongoing rolling review of the retail outlets we collect prices from for the CPI continues.

The July 2012 issue of Price Index News has more information on the review’s scope.

Changes to the first two review groups are:

Changes to the third review group (sports and stationery goods) will be implemented in Consumers Price Index: March 2013 quarter, released 17 April 2013.

The sample of retail outlets  we visit has been reallocated, to better reflect market shares, for the following items:

  • outdoor furniture
  • barbecues
  • stationery
  • books.

For the fourth group, we reviewed the convenience stores and petrol stations visited for food items. We also reviewed the outlets visited for restaurant meals, ready-to-eat food, alcohol, and cigarettes and tobacco. The sample of retail outlets we visit has been reallocated for the following items tracked in the CPI:

  • wine (off-licence) – we now visit more specialist wine stores
  • ready-to-eat food – we have expanded the range of fast food chains we visit.

We have also added online price collection for takeaway pizzas.

Changes to the fourth group will be implemented in the Food Price Index: April 2013, released 13 May 2013, and in the CPI for the June 2013 quarter, released 16 July 2013.

For more information on the review, please contact:

Nick Martelli
Wellington
04 931 4600
info@stats.govt.nz

Producers price index review of scope and purpose

Statistics New Zealand is reviewing the scope and purpose of the producers price index (PPI).

The PPI is a key economic indicator in most countries, including New Zealand. PPIs are constructed as either output indexes, measuring change in the prices that producers receive for their outputs; or input indexes, measuring change in the prices that producers pay for their inputs.

The PPIs produced by Statistics NZ are used to support the calculation of volume estimates of gross domestic product (GDP) in New Zealand’s national accounts. They are also used as indicators of short-term inflationary trends and in contract indexation clauses to reflect changes in costs or prices during the life of commercial contracts.

We have produced our PPIs in essentially their current form for the past 30 years. Over this time the indexes have been re-weighted and re-referenced several times. However, the underlying conceptual basis and coverage are largely unchanged.

As part of our goal to deliver accessible, relevant, and timely statistics for all New Zealanders, we need to ensure the statistics we produce meet the needs of our users, where possible. A formal review in which we consult our data users will ensure we understand their needs.

Key issues to be covered in the review include:

  • principal purpose of the PPI
  • other uses of the PPI
  • scope of the PPI
  • what should be published
  • alternative approaches for measuring business inflation.

A discussion paper will be available to the public on the Statistics NZ website later this year. We will call for public submissions once the paper is released.

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6. Making Contact

CPI advisory committee 2013

Statistics NZ is convening a consumers price index (CPI) advisory committee. This committee meets in May 2013 to undertake an independent review of the methods and practices used to compile the CPI, and to advise the Government Statistician on the CPI.

The Government Statistician appointed the following committee members:

  • Diana Crossan, former Retirement Commissioner
  • Dr Carla Houkamau, University of Auckland Business School
  • Dr Kirdan Lees, New Zealand Institute of Economic Research
  • Dr John McDermott, Reserve Bank of New Zealand
  • Professor Jacques Poot, University of Waikato
  • Associate Professor Marco Reale, University of Canterbury
  • Dr Bill Rosenberg, New Zealand Council of Trade Unions
  • Stephen Summers, Business New Zealand
  • Keith Woolford (international expert), formerly of the Australian Bureau of Statistics.

Diana Crossan will chair the committee.

Members were selected to bring professional expertise, different perspectives, and the confidence of the wide range of CPI users to the committee.

Periodically convening independent CPI advisory committees helps to ensure public confidence in the index and is recommended as good practice in the International Labour Organization's resolution on CPIs.

We have prepared a discussion paper and a background paper for the committee and the wider CPI user community. They will help to inform the topics the committee will consider.

These papers are available on our website.

We invite you to make a submission on any topic in the papers, and on other topics concerning the CPI. We are also happy to meet with you if you would like to discuss a topic, or a potential submission. The committee will consider submissions when it meets in May.

Submissions close on 24 April 2013.

You can email your submission to: cpireview@stats.govt.nz or ring Peter Campion (04 931 4600 or 0508 525 525).

Following the meeting, we will publish a report from the committee (including recommendations) in July 2013.

The committee’s recommendations will inform the next three-yearly CPI review, which will be implemented when the September 2014 quarter CPI is released in October 2014.

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7. Release dates

Price index release calendar for the next three months

April 2013

12 Apr 13            Food Price Index: March 2013
17 Apr 13     M    Consumers Price Index: March 2013 quarter

May 2013

7   May 13    M    Labour Cost Index (Salary and Wage Rates): March 2013 quarter
13 May 13           Food Price Index: April 2013
17 May 13    M    Capital Goods Price Index: March 2013 quarter
17 May 13    M    Producers Price Index: March 2013 quarter
17 May 13           Farm Expenses Price Indexes: March 2013 quarter – tables
31 May 13    M    Overseas Trade Indexes (Volumes): March 2013 quarter (provisional)
31 May 13    M    Overseas Trade Indexes (Prices): March 2013 quarter (provisional)

June 2013

14 Jun 13            Food Price Index: May 2013

M= Media conference

This issue of Price Index News was released on Thursday, 11 April 2013

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