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Price Index News: January 2015

1. Short stories

100 years of the CPI

100 years of the CPI looks at how prices faced by New Zealand households have changed over the past 100 years, and gives context to major price changes over that time.  

2. Working with others

Research on online data with US-based PriceStats

Automated web-scraping of online data gives potential for timely and high-frequency price indexes. But online data has limited structured information on the characteristics of products with which we can apply quality-adjustment techniques such as hedonic regression. This means that new methods are required.

At Statistics New Zealand, we recently entered into a collaborative research agreement with US-based PriceStats. They are supplying us with monthly feeds of daily online data for a range of New Zealand retailers, to investigate new methodologies that could be used to measure price change for online data. PriceStats is the commercial counterpart of the Billion Prices Project @ MIT, an academic initiative that uses prices collected daily from online retailers around the world to conduct economic research.

We initially used New Zealand consumer electronics online data from the Billion Prices Project to explore methods for producing quality-adjusted price indexes from online data.

We presented this analysis at the UNECE/ILO meeting of the group of experts on consumer price indices in Geneva in May 2014. In 'Fixed-effects with a window splice: quality-adjusted price indexes with no characteristic information', we explain how the longitudinal nature of the data can be utilised to produce quality-adjusted price indexes.

Under the recent agreement with PriceStats we will further explore using this approach – by testing it on online data collected by PriceStats for a wider range of New Zealand retailers and products.

3. Nuts and bolts

Review of scope and purpose of the producers price index

The Review of scope and purpose of the producers price index article outlines our decisions from the review.

World-leading use of consumer electronics scanner data

In the Consumers Price Index: September 2014 quarter, we began using retail transaction data (or ‘scanner data’), supplied by market research company GfK, to estimate the price movements of 12 consumer electronics categories in the CPI:

  • heat pumps
  • desktop computers
  • laptop computers
  • tablet computers
  • multi-function devices
  • cellphone handsets
  • digital cameras
  • digital camera memory cards
  • television sets
  • set-top boxes for television sets
  • DVD, Blu-ray players and player/recorders
  • home theatre and stereo systems.

This is the first time a national statistics office has made such comprehensive use of scanner data to measure price change for consumer electronics goods.

Scanner data lets us track the prices and quantities of all products sold during a period of time. The data supplied to us includes hundreds of thousands of transactions each month.

We collaborated with Statistics Netherlands on a method to measure price change with this type of data. This method incorporates the price-determining features of products into statistical models, to ensure we remove their changing quality from the measurement of price change. 

Measuring price change for consumer electronics using scanner data explains the methodology and implementation in more detail.

4. 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 – and show no change 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

We carry out the CPI Local Authority Rates Survey each year 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, we’ve included 80 to 92 percent of the weight in the sample of local authority rates 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 us showing rate changes in both the September and December quarter CPIs.

For the December 2014 quarter CPI, published in January 2015, we’ll include the remaining 8 percent of the weight of the local authority rates sample.


Due to prices being unavailable at the time of price collection, we impute an average 1–2 percent of prices (not including seasonal items such as summer clothing) each quarter in the CPI.

For the December 2014 quarter, we will also impute quarterly price movements for prices collected directly from retail outlets for the following regional pricing centres:

  • Whangarei – imputed from Hamilton
  • Napier-Hastings –  from Tauranga
  • New Plymouth – from  Hamilton
  • Palmerston North – from Hamilton
  • Nelson – from Dunedin
  • Invercargill – from Dunedin.

We did not receive prices for the above pricing centres during the December 2014 quarter, due to industrial action by some price collectors.

The December quarter also includes monthly prices collected for food and some non-food items. On average, we impute 0.7 percent of prices (not including seasonal fresh fruit and vegetables) in a typical month. For the December 2014 quarter CPI, we will impute November monthly food price movements for the prices collected directly from retail outlets, for the following regional pricing centres:

  • Whangarei – imputed from Hamilton
  • Napier-Hastings –  from Tauranga
  • New Plymouth – from Hamilton
  • Invercargill – from Dunedin.

We will also impute November and December food and non-food monthly price movements for prices collected directly from retail outlets in Palmerston North – from Hamilton.

Industrial action by some price collectors meant we didn’t receive prices for the above pricing centres during November 2014.

5. Development updates

New CPI initiatives for 2015

We will begin work on two new consumers price index (CPI) initiatives in 2015. These initiatives will help ensure we continue to meet customer needs.

We will produce a suite of eight household living-costs price indexes (HLPIs) for four household groups by early 2016:

  • beneficiaries
  • income groups (quintiles)
  • Māori
  • superannuitants.

These HLPIs will provide greater insight into the inflation these household groups experience.

We will also publish seasonally adjusted analytical CPI series by the June 2015 quarter, to give our customers better understanding of underlying inflation trends without the influence of seasonal price change.

These initiatives came from the recommendations the 2013 CPI Advisory Committee made. 

Decision on 2013 CPI Advisory Committee recommendations provides details about our decisions on the committee’s recommendations.

For more information on the HLPIs and seasonally adjusted CPI series contact:

Alan Bentley
Wellington 04 931 4600 or 0508 525 525

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 tables (SUT) we produce each year as part of the New Zealand System of National Accounts. The 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 Industry Output Categories level 4 and above (there are 118 level 4 industries).

We introduced the latest weights in the March 2014 quarter PPI, based on the 2010/11 SUT. These were first used to weight price movements from the December 2013 quarter to the March 2014 quarter.

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

We use the PPIs as deflators in calculating gross domestic product, which is New Zealand’s official measure of economic growth. These deflators 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 so all parties have agreed procedures for adjusting originally contracted prices.

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 survey 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 eight-year cycles for most industries, and on four or 12-year cycles for those remaining.
At present, we are reviewing these industries:

  • fishing 
  • meat and meat product manufacturing
  • seafood processing
  • dairy product manufacturing
  • fruit, oil, cereal, and other food product manufacturing
  • beverage product manufacturing 
  • telecommunication services
  • Internet service providers and data processing services
  • computer system design and related services

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

Implemented in the March 2013 quarter:

  • printing and publishing

Implemented in the June 2013 quarter:

  • primary metal and metal product manufacturing
  • fabricated metal product manufacturing
  • electricity, gas, and water

Implemented in the March 2014 quarter:

  • farm expenses price index

Implemented in the June 2014 quarter:

  • forestry and logging
  • aquaculture
  • hunting and trapping
  • agriculture, forestry, and fishing support services
  • tobacco product manufacturing
  • petroleum and coal product manufacturing
  • basic chemical and basic polymer manufacturing
  • fertiliser and pesticide manufacturing
  • pharmaceutical, cleaning, and other chemical manufacturing
  • transport equipment manufacturing
  • electronic and electrical equipment manufacturing 
  • machinery manufacturing
  • rail, water, air, scenic and sightseeing transport 

Implemented in the September 2014 quarter:

  • agriculture.

All industries that are currently being reviewed will have lower-level PPI commodity weights and updated product samples implemented after the December 2014 quarter. We will publish an updated list of these industries in Price Index News.

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

James Griffin
Wellington 04 931 4600 or 0508 525 525

Labour cost index review underway

The labour cost index (LCI) measures changes in wage rates and non-wage labour costs (eg the costs for annual leave and superannuation). We are now reviewing the LCI weights. The review will help keep the LCI relevant – to ensure it reflects the current industry and occupation structures of the labour market.

Our recent work on the review focused on implementing the new weights in the LCI salary and wage rates for the September 2014 quarter. Results of the new weights are available in the commentary of the Labour Cost Index (Salary and Wage Rates): September 2014 quarter.

The main data sources we used for the new weights were the 2013 Census, the Business Register of New Zealand businesses, the Labour Cost Survey, the Quarterly Employment Survey, and linked employer-employee data.

See Reweighting the labour cost index (salary and wage rates) for details about the methods we used to compile the new weights.

The final phase of the review will be to reweight the non-wage labour costs component of the index, which we will publish in October 2015.

Price indexes quickly lose relevance if not reviewed. This would undermine the fit-for-purpose quality not only of the indexes, but also of the wider macroeconomic statistics system. This is because we use the LCI as a deflator in calculating gross domestic product. The business community also uses the LCI 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 LCI review is 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.

For further information about the review, contact:

Ludeth Mariposa
Wellington 04 931 4600 or 0508 525 525
Email: (with ‘LCI review’ in the subject line)

6. Release dates

Price index release calendar for the next three months

January 2015

Thu  15  Jan             Food Price Index: December 2014
Wed 21  Jan     M    Consumers Price Index: December 2014 quarter

February 2015

Wed 4   Feb             Labour Market Statistics: December 2014 quarter
Fri   13  Feb             Food Price Index: January 2015
Thu 19  Feb      M    Producers Price Index: December 2014 quarter
Thu 19  Feb      M    Capital Goods Price Index: December 2014 quarter
Thu 19  Feb             Farm Expenses Price Index: December 2014 quarter – tables

March 2015

Mon 2   Mar     M    Overseas Trade Indexes (Prices): December 2014 quarter (provisional)
Mon 2   Mar     M    Overseas Trade Indexes (Volumes): December 2014 quarter (provisional)
Thu 12  Mar            Food Price Index: February 2015

M= Media conference

This issue of Price Index News was released on Wednesday 14 January 2015.

ISSN 2350-3092

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