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Price Index News: January 2009

1. Short stories

Margarine use spreads at butter's expense

Kiwis have always had a soft spot for butter. The traditional dairy spread and baking ingredient has long been in the consumers price index (CPI) basket. By comparison, the vegetable spread margarine was added to the CPI basket in 1975. At that time, the quantity of butter purchased by households outweighed the quantity of margarine by a ratio of nine to one. Now, the ratio is about two to one in favour of margarine. Margarine use spreads at butter's expense takes a look at how margarine's relative importance in the Kiwi diet has grown over the past three decades.

Watching the box

Television has been a part of New Zealanders' lives for nearly five decades. For all but six of those years, the consumers price index has tracked changes in the price of buying TVs, hiring TVs, buying television licences and subscribing to pay television. Watching the box takes a look at how New Zealanders have gone from watching one channel on black and white 'consolettes' in the mid-1960s (that cost about $4,400 in today's terms), to watching an array of free-to-air and pay channels today on flat-panel colour television sets.

Delving into discounting

At any time there are bargains to be had, whether they are buy-one-get-one-free deals or a special on the standard price! Delving into discounting reports recent 'specialling' incidence for prices collected for some big-ticket household items and electronics equipment within the consumers price index.

Employer KiwiSaver contributions and the labour cost index

From 1 April 2008, employers have been making compulsory contributions to their employees' KiwiSaver schemes. The changing cost of employer contributions to superannuation schemes is one of six non-wage labour costs measured by the labour cost index (all labour costs). Employer KiwiSaver contributions and labour cost index looks at the impact of employer KiwiSaver net contributions on the June 2008 quarter labour cost index (all labour costs).

Labour Cost Index (All Labour Costs): June 2008 quarter results

The labour cost index (all labour costs) for the June 2008 quarter was released in November 2008. The index measures changes in the cost of six non-wage labour costs to the employer. Results from the Labour Cost Index (all labour costs) June 2008 quarter touches on the movements and breakdown for the June 2008 quarter release.

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2. Working with others

Economic measurement group workshop

The Centre for Applied Economic Research at the University of New South Wales (UNSW) hosted the eighth annual international Economic Measurement Group Workshop in December 2008. The three themes were price measurement, productivity measurement, and services. Statistics NZ presented papers at the productivity and price measurements sessions. The price measurement paper outlined the history and concepts of the New Zealand producers price index (PPI) and reviewed the practices conducted by other statistical agencies around the world. It also looked at the benefits and limitations of producing a PPI.

Burgers, mackerel and PPPs

The Economist magazine's 'Big Mac' Index is one of the world's best known economic indicators, even though it has its origins in a semi-humorous exercise that uses the relative prices of Big Macs around the world to value exchange rates – aptly named Burgernomics. While the Big Mac index simply illustrates the theory of purchasing power parity (PPP), a wider and more robust programme of price comparison is undertaken by national statistical organisations around the world, the latest results of which have recently become available.

Burgers, mackerel and PPPs gives an overview of Burgernomics, PPPs and provides links to the latest results of the official PPP programmes.

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3. Virtual papers

CPI review completed

The consumers price index (CPI) basket of representative goods and services has been reselected and reweighted to ensure that it continues to reflect household spending patterns.

The main source of information used for the review was the Household Economic Survey – a survey of 2,600 households, which ran from July 2006 to June 2007. Changes that have been made to the basket, which reflect changes in spending patterns and lifestyle choices, include:

  • heat pumps are now in, replacing solid fuel burners
  • house-keeping and lawn mowing services have been added
  • auction services are in, reflecting the growing popularity of online trading
  • ten-pin bowling has been added as a popular casual sporting activity
  • calculators, old-style TVs, DVD/VCR combo players, video cassette tapes, and photographic film are out, while free-to-air digital television receivers, in-car satellite navigation units and digital music downloads are in.

Based on the household survey and other information, Statistics NZ estimates that of every $100 spent by households on goods and services covered by the CPI, $22.75 is spent on housing and household utilities, compared with $20.02 in 2006. This reflects increased spending on renting and on purchasing new housing, and higher electricity prices.

Food accounts for $17.83 of every $100 spent, compared with $17.38 in 2006. Other groups have shown declines in relative importance, including transport (down from $17.24 to $16.18 of every $100 spent), with lower spending on cars contributing to the fall. However, the relative importance of petrol has increased from $5.38 to $5.47 of every $100 spent.

For more information, and a full list of goods and services that have been added to or removed from the CPI basket, read the paper Consumers Price Index, 2008 Review.

Consumers price index retrospective superlative price index, 2008

A review of the consumers price index (CPI) was implemented when the September 2008 quarter index was released in October 2008. The review encompassed reselecting and reweighting the basket of representative goods and services to ensure it continues to reflect household spending patterns.

Once each new set of CPI expenditure weights has been calculated, it is possible to make use of the existing and new weights to calculate a 'superlative' index on a retrospective basis. The information paper Consumers Price Index Retrospective Superlative Index, 2008 presents results of a retrospective superlative index time series calculated from the June 2002 quarter to the June 2008 quarter. The six-year time series provides an indication of the effect of commodity substitution on the fixed-weight CPI. Commodity substitution occurs when households react to changes in relative prices by choosing to reduce purchases of goods and services showing higher relative price change, and instead buy more of those showing lower relative price change. The resulting superlative index also reflects changes and improvements in the methods and data sources used to derive the expenditure weights.

In 2007, Statistics NZ published the paper Consumers Price Index: Retrospective Superlative Index and Impact of Alternative Housing Weights, which provided results of a retrospective superlative index between the June 2002 quarter and the June 2006 quarter. Consumers Price Index Retrospective Superlative Index, 2008 builds on the 2007 paper by extending the existing time series by a further two years.

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4. Nuts and bolts

The consumers price index basket

The consumers price index (CPI) measures the rate of price change of goods and services purchased by households. Following a recent review of the CPI (see the 'virtual papers' section of this newsletter for more information), the CPI is calculated by tracking changes in the prices of a basket of 694 representative goods and services. Statistics NZ routinely publishes CPI indexes for 11 groups, 45 subgroups and 107 classes. Weighted average retail prices are also published for 44 selected food goods and services, and for 35 selected other goods and services.

The spreadsheet Consumers price index basket (within class, 2008) provides updated information (including changes made as part of the recent review) about the types of goods and services within each of the 107 CPI classes. If you do not have access to Excel, you may use the Excel file viewer to view, print and export the contents of the file.

Reweighting the labour cost index (salary and wage rates)

The relative importance of industries and occupations in the labour cost index (salary and wage rates) has been updated, using the 2006 Census of Population and Dwellings and a range of other information. Reweighting the Labour Cost Index (salary and wage rates) gives an overview of the data sources and methods used to calculate the new expenditure weights, which were implemented with the release of the September 2008 quarter index on 3 November 2008. See the commentary of the September 2008 quarter information release for an overview of the main changes that resulted from the review.

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5. Development updates

Labour cost index review

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

The reweight will ensure 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 NZ's Business Frame (a register of New Zealand businesses), the Labour Cost Survey and the Quarterly Employment Survey (QES).

The new expenditure weights are being 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 reweighted salary and wage rates indexes for the September 2008 quarter were released on 3 November 2008 (see the 'nuts and bolts' section of this newsletter for more information). The reweighted indexes of non-wage labour costs for the June 2009 quarter will be released in October 2009. These reweights are based on the existing LCI sample and the existing industry and occupation groups.

Following the reweight using the existing classifications, more up-to-date industry (Australian and New Zealand Standard Industrial Classification 2006), and occupation (Australian and New Zealand Standard Classification of Occupations) classifications will be implemented in the LCI. The new industry and occupation classifications have a different structure from existing classifications used in the LCI. 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 salary and wage rates information release.

Recent work on the review has focused on classifying the existing sample to the new industry and occupation classifications.

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

This is an update on progress with the redevelopment of the producers price index (PPI), farm expenses price index (FEPI) and capital goods price index (CGPI).

Redevelopment is currently under way on the following indexes:

  • CGPI
  • FEPI
  • rubber, plastics and other chemical manufacturing
  • legal and accounting services
  • water transport
  • wholesale trade
  • residential property operators
  • commercial property operators and developers
  • real estate agents
  • other property services
  • vehicle and equipment hire
  • scientific research and technical services
  • health and community services (input index only)
  • cultural and recreational services
  • education (input index only)
  • personal and other services
  • other manufacturing.

The following indexes are provisionally complete and will be implemented in the PPI once they have been thoroughly tested:

  • horticulture and fruit growing
  • livestock and cropping farming
  • dairy cattle farming
  • other farming
  • petroleum, coal and basic chemical manufacturing
  • non-metallic mineral product manufacturing
  • heavy and civil engineering
  • construction trade services
  • retail trade
  • telecommunication services
  • mining
  • other transport and storage services.

The following indexes have already been tested and implemented:

  • services to agriculture, hunting and trapping
  • forestry and logging
  • meat and meat product manufacturing
  • dairy product manufacturing
  • other food manufacturing
  • tobacco, beverage and malt manufacturing
  • wood product manufacturing
  • paper and paper product manufacturing
  • printing, publishing and recorded media
  • basic metal manufacturing
  • sheet and fabricated metal product manufacturing
  • transport equipment manufacturing
  • machinery and equipment manufacturing
  • electricity generation and supply
  • gas supply
  • residential construction
  • non-residential construction
  • accommodation, cafes and restaurants
  • road transport
  • air transport
  • rail transport
  • postal and courier services
  • computer services
  • other business services
  • textile and apparel manufacturing
  • finance
  • insurance
  • services to finance and insurance
  • ownership of owner-occupied dwellings
  • fishing.

When the redevelopment is complete, a sources and methods publication will be published.

Current redevelopment provides further information about the project and the progress to date.

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6. 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
  • 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:

Chris Pike (Acting 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)
Ludeth Mariposa (Acting project manager – Consumers Price Index/Labour Cost 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

January 2009

Tue 20 M Consumers Price Index: December 2008 quarter
Food Price Index: December 2008

February 2009

Mon 2 M Labour Cost Index (Salary and Wage Rates): December 2008 quarter
Thurs 12 Food Price Index: January 2009
Mon 16 M Producers Price Index: December 2008 quarter
Capital Goods Price Index: December 2008 quarter

March 2009

Wed 11 M Overseas Trade Indexes (Prices): December 2008 quarter (provisional)
Overseas Trade Indexes (Volumes): December 2008 quarter (provisional)
Thur 12 Food Price Index: February 2009
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