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Price Index News: January 2014

1. Short stories

Forestry exports in 2012 compared with 1992

The article Forestry exports in 2012 compared with 1992 and related infographic, examine changes from 1992 to 2012 in the mix of the forestry products we export, and changes in the major countries buying these products.

Fresh fruit and vegetable prices – our global connection

Fresh fruit and vegetable prices – our global connection looks at factors affecting the prices we pay for fresh fruit and vegetables.

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2. Working with others

Prices team at statistics conference and economic measurement workshop

The New Zealand Statistical Association (NZSA) and the Operations Research Society of New Zealand (ORSNZ) combined forces in 2013 to hold a joint conference in Hamilton, on 25–27 November.

Prices senior researcher Frances Krsinich attended. She presented a paper on a new methodology for quality-adjusted price indexes – called the fixed-effects modified-splice method. This method takes advantage of the longitudinal nature of the data to quality-adjust price indexes when the characteristics of products are not directly observed. The method has a number of important potential applications; in particular, to produce price indexes from supermarket scanner data, and from online prices gathered using automated web-scraping. This methodology is the subject of Frances's PhD research.

See 2013 Joint NZSA+ORSNZ Conference for the conference programme.

Straight after the NZSA conference, Frances attended the Economic Measurement Group (EMG) workshop in Sydney on 28–29 November. This annual workshop is run by the Centre for Applied Economic Research of the University of New South Wales. Papers presented included ones on price measurement of high-tech products, research and development, and house prices.

As always with the EMG workshops, the opportunities for discussion with international researchers in the area of price measurement were as valuable as the formal part of the programme.

See Economic Measurement Group Workshop 2013 for the programme and papers.

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3. Virtual papers

Analytical retrospective look at the labour cost index

Analytical retrospective look at the labour cost index compares a new retrospective 'Fisher' price index with the published LCI, to shed light on whether changes in the relative importance of industries and occupations between the 2001 and 2006 Censuses had much effect on the fixed-weighted LCI from 2003 to 2008.

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4. Nuts and bolts

How we measure cultural services in the CPI

How we measure cultural services in the CPI explains the sources and methods we use to compile the cultural services class of the consumers price index (CPI).

How we measure recreational and sporting equipment in the CPI

How we measure recreational and sporting equipment in the CPI explains the sources and methods used to compile the equipment for sport, camping, and outdoor recreation class of the CPI.

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5. On the horizon

Summer seasonal goods

Some goods in the CPI basket are purchased mainly during summer. We conduct the CPI summer seasonal survey of these goods once a year, in the December quarter.

Summer seasonal goods in the basket include summer clothing, footwear, and sports equipment. We price these goods only in December quarters because they have a limited supply and demand in other quarters. We show changes in summer seasonal prices fully in December quarters – no change is shown in other quarters.

However, we also collect some outdoor-living equipment prices, such as those for barbecues, in March quarters.

Local authority rates in the CPI

The CPI Local Authority Rates Survey is conducted annually in the September quarter, for a sample of territorial authorities and regional councils. Rates are surveyed once a year because local authorities usually set their rates annually.

While rate changes usually take effect from 1 July, not all territorial authorities and regional councils set rates during the September quarter. For the past five years, between 80 and 90 percent of the weight in the sample of local authority rates has been included in the September quarter CPI. The small number of rates set after the September quarter, combined with the timing of survey returns and processing, result in rate changes being shown in both the September and December quarter CPIs. For the December 2013 quarter CPI, the remaining 18 percent of the weight of the sample of local authority rates will be included.

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6. Development updates

Annual update of producers price index weights

The producers price indexes (PPIs) that Statistics NZ produces are used as deflators in the calculation of gross domestic product. These deflators are used to remove the effect of price change so that change in the volume of goods and services produced in the economy can be measured.

The PPIs are also used as an inflation measure and in contract indexation; for example, to reflect changes in prices during the life of a commercial project.

We update the PPI industry and commodity weights annually to help maintain the relevance of this index. The weights come from the supply and use tables (SUT) produced annually as part of the New Zealand System of National Accounts. These updates reflect changes in economy-wide income and expenditure, in particular the mix of products and the mix of industries.

We re-weight the industries at the New Zealand Standard Industrial Output Categories level 4 and above (there are 118 level 4 industries).

We introduced the latest weights in the March 2013 quarter’s PPI, based on 2009/10 SUT. These were first used to weight price movements from the December 2012 quarter to the March 2013 quarter.

We are also updating the lower-level commodity indexes and product samples. This work is part of reviewing the business price indexes.

Reviewing the business price indexes

We are continuing our rolling review of the business price indexes – the producers price index (PPI), the farm expenses price index (FEPI), and the capital goods price index (CGPI). 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 update 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, we prioritised the ANZSIC06 industries and are reviewing them on six-year cycles for most industries, and on three- or 12-year cycles for those remaining.
 
Currently, we are reviewing these industries:

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

We have completed reviews and also implemented lower-level PPI commodity weights and updated product samples for the following industries:

  • printing and publishing
  • primary metal and metal product manufacturing
  • fabricated metal product manufacturing
  • electricity, gas, and water.

The next lot of industries to have lower-level PPI commodity weights and product samples updated will be in the June 2014 quarter (published in August 2014). We will publish an updated list of these industries in the next Price Index News.

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

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

Progress with the CPI rolling review of retail outlets

The first cycle of our rolling review of the retail outlets we collect prices from for the CPI will be completed in January 2014 – when the Consumers Price Index: December 2013 quarter is released on 21 January 2014.

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

At the start of the CPI rolling review, the CPI basket items we track at retail outlets were organised into eight review groups. Consumer electronics items were to be reviewed annually, in group four and group eight. However, a decision was made to reduce the number of review groups to seven by reviewing consumer electronics items once, in the last group. This is because external data about the characteristics of consumer electronics items was not available at the time that the first scheduled review of that group was to commence.

Changes actioned in the first six review groups were:

Changes to Group 7 (home appliances, audio-visual equipment, electronic equipment and games, builders’ hardware, and garden supplies) will be implemented in the Consumers Price Index: December 2013 quarter, to be released on 21 January 2014.

During the CPI rolling review, we reviewed the following:

  • outlets visited in Groups 1–4 and Group 7
  • product specifications of the items priced at the outlets visited in Groups 1–7
  • mix of brands tracked at supermarkets (Groups 5 and 6), to ensure they continue to reflect market shares.

We also expanded price collection for the following items:

  • CDs and books –  to include local and overseas online retailers (Group 3)
  • magazines –  to include local online retailers (Group 3)
  • takeaway pizzas – to collect prices from pizza chain outlets online (Group 4)
  • pre-recorded Blu-ray discs, pre-recorded DVDs, tablets, MP3 players, and computer software –  to include local online retailers (Group 7).

For more information on the review, please contact:

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

Labour cost index review

Statistics New Zealand is reviewing the labour cost index (LCI) weights. The LCI measures changes in wage rates and non-wage labour costs.

The review will help maintain the relevance of the LCI – to ensure it reflects the current industry and occupation structures of the labour market.

Price indexes quickly lose relevance if not reviewed, which would undermine the fit-for-purpose quality not only of the indexes, but also of the wider macro-economic statistics system. The LCI is used as a deflator in the calculation of gross domestic product. It is also used by the business community in wage negotiations and contract indexation clauses. Government agencies such as the Reserve Bank and The Treasury use the LCI to monitor and forecast wage inflation.

The 2013 Census is a key data source for the review. Other important data sources include Statistics NZ's Business Frame (a register of New Zealand businesses), the Labour Cost Survey, the Quarterly Employment Survey, and linked employer-employee data.

The review will be based on the existing industry and occupation groups – the New Zealand Standard Industrial Output Categories and the Australian and New Zealand Standard Classification of Occupations, respectively. We will refresh the sample of jobs being tracked as part of the review, to reflect relative growth and decline in occupations and industries.

The first release for the reweighted indexes will be for the September 2014 (salary and wage rates) and June 2015 (non-wage labour costs) quarters.

For further information about the LCI review, please contact:

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

CPI review update

In June 2013 we began a review of the consumers price index (CPI). Regular CPI reviews are carried out every three years to help ensure that the CPI basket of goods and services continues to reflect household spending patterns.

The CPI is made up of a representative ‘basket’ of goods and services purchased by New Zealand households. As part of the review, the relative importance of these goods and services will be updated, using information from the 2012/13 Household Economic Survey (HES) and other sources. We will also reselect the goods and services that are included in the basket.

Some of the 2013 CPI Advisory Committee’s recommendations will also be implemented in the review.

We’ll complete the latest review when the September 2014 quarter CPI is published in October 2014.

The previous CPI review used information from the 2009/10 HES, and was implemented when the September 2011 quarter CPI was published in October 2011. Before the 2011 review, New Zealand had entered a six-quarter recession that began in the March 2008 quarter. This recession influenced household spending, and was reflected in the reviewed CPI.

Changes to the CPI basket in the 2011 review showed a continuing shift in household spending towards the latest technology – goods such as tablets, external computer hard drives, e-books, and digital movie downloads were added to the CPI basket. Dictionaries and envelopes were two of the goods removed from the basket.

For more information on the 2014 CPI review please contact:

Nick Martelli
Wellington
04 931 4600

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7. Making contact

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, excluding labour and capital.

The PPIs we produce are used as deflators in the calculation of gross domestic product. These deflators are used to remove the effect of price change, so we can measure change in the volume of goods and services produced in the economy. The PPIs are also used as an inflation measure and in contract indexation; for example, to reflect changes in prices during the life of a commercial project.

We have produced our PPIs in 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 have remained largely unchanged.

In our recent  review of scope and purpose discussion paper we consulted PPI users. We are currently considering the feedback received.

We would still like to hear from you about the review options (see contacts below).

Key issues covered in the review include:

  • principal purpose of the PPI
  • weighting and pricing basis used
  • transactions that are in the PPI’s scope
  • industry and commodity detail and frequency
  • index formula
  • dissemination options.

We will have an update in Price Index News about the outcomes of the consultation, and any changes we will be making to the PPI.

Feedback – Please email your submissions about the review by 31 January 2014 to: info@stats.govt.nz or ring James Griffin (04 931 4600 or 0508 525 525).

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8. Release dates

Price index release calendar for the next three months

January 2014

Wed     15 Jan 14           Food Price Index: December 2013
Tue      21 Jan 14    M    Consumers Price Index: December 2013 quarter

February 2014

Wed     5  Feb 14    M    Labour Cost Index (Salary and Wage Rates): December 2013 quarter
Fri       14 Feb 14           Food Price Index: January 2014
Thu     20 Feb 14    M    Producers Price Index: December 2013 quarter
Thu     20 Feb 14    M    Capital Goods Price Index: December 2013 quarter

March 2014

Mon     3  Mar 14    M    Overseas Trade Indexes (Prices): December 2013 quarter (provisional)
Mon     3  Mar 14    M    Overseas Trade Indexes (Volumes): December 2013 quarter (provisional)
Thu     13 Mar 14           Food Price Index: February 2014

M= Media conference

This issue of Price Index News was released on Monday, 13 January 2014

ISSN 2350-3092

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