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Price Index News: July 2012

1. Short stories

Changing the mix: tracking alcoholic beverages in the CPI basket

Changing the mix: tracking alcoholic beverages in the CPI basket looks at how alcoholic beverages in the consumers price index basket have changed since they were first added in 1955. Looking at changes to the basket over the years gives a refreshing insight into how our tastes for alcoholic beverages have changed over time.

The distribution of pay rate changes over the decade to 2012

The distribution of pay rate changes over the decade to 2012 uses the labour cost index distribution information and skill level movements to explain the different trends in wage growth over the period.

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2. Working with others

Prices meeting with the Australian Bureau of Statistics

Statistics NZ's Prices team recently hosted five staff from the Australian Bureau of Statistics (ABS) for a three-day meeting. The ABS recently kicked off a project to expand the range of service industries covered by the Australian producer price index (PPI). They were keen to hear about how we measure these industries, which the New Zealand PPI already covers.

The meeting was a great opportunity for the two teams to share knowledge and experiences. At the same time as the ABS Prices team is beefing up the services component of its PPI, our team is undertaking a comprehensive rolling review of both goods and service industries in our PPI. The purpose of our review is to maintain the relevance of the PPI and parts of the national accounts.

The teams have agreed on how they will share information and work together as the two PPI reviews progress over the coming months. We also discussed how the two agencies could collaborate more closely on purchasing power parity measurement, and on using handheld devices to collect prices for the consumers price index.

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3. Virtual papers

Geneva meeting of consumer price index experts

In May 2012, the United Nations Economic Commission for Europe and the International Labour Organization hosted a meeting in Geneva to discuss consumer price indexes (CPIs). Frances Krsinich, senior researcher in Statistics NZ's Prices unit, attended the meeting and presented a paper prepared in collaboration with Jan de Haan of Statistics Netherlands.

The agenda of the meeting covered a wide range of topics. Areas of particular focus were house price statistics, scanner data, and quality adjustment for services. 

The Residential property price indices handbook, recently released by Eurostat, recommends best practices for measuring house prices. The presentations from many countries, including Portugal, the United Kingdom, and Japan, highlighted how sensitive house price statistics can be to the methodology adopted, and therefore how crucial best practice is. 

A wide range of papers on scanner data outlined different countries' experience with the initial stages of investigating or adopting scanner data into their CPIs.  In our paper, presented during session 4, we outlined an extension of the recently proposed rolling year 'GEKS' method for producing price indexes from scanner data. The extension to the method estimates and incorporates price movements corresponding to new and disappearing specifications of products, by incorporating hedonic regression techniques. We applied this method to New Zealand consumer electronics scanner data and compared it with other approaches. The results show that not accounting for the price movements of new and disappearing specifications may lead to an upwards bias in the price measurement of consumer electronics.

The meeting was a valuable opportunity to exchange ideas and experiences with our counterparts in other official statistical agencies and academics working in price measurement.

We then presented an updated version of the paper at the annual New Zealand Association of Economists' conference in Palmerston North on 27 June. The paper will be available on Statistics NZ's website and a link will be included in the October 2012 issue of Price Index News.

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4. Nuts and bolts

Accounting for quality change in the CPI

Accounting for quality change in the CPI explains the methods used to help ensure goods and services are tracked in the consumers price index (CPI) at a fixed quality. These methods help to ensure that movements in the CPI reflect only price change.

Gas and solid fuels in the CPI

The article Gas and solid fuels in the CPI explains the sources and methods used to compile the gas and solid fuels class-level indexes of the consumers price index (CPI). These indexes had a combined expenditure weight of 0.55 percent of the CPI at the June 2011 quarter. 

Waste disposal services outputs in the PPI

The waste collection, treatment, and disposal services outputs index of the producers price index (PPI) measures change in the prices received by waste disposal service providers. This index contributes around 8 percent to the overall weight of the electricity, gas, water, and waste services index, and 45 percent to the weight of the water, sewerage, drainage, and waste services sub-index. Waste disposal services outputs in the PPI discusses changes in this service index as a result of moving to the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06).

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5. On the horizon

Winter seasonal goods

Some goods in the CPI basket are purchased mainly during winter. We conduct the CPI winter seasonal survey of these goods once a year, in the June quarter. Winter seasonal goods in the basket include winter clothing and footwear, winter-weight duvets, and electric fan heaters. These goods are priced only in June quarters because they have a limited supply and demand in other quarters. Prices of winter seasonal goods show change only in June quarters.

Changes to employer superannuation costs

The labour cost index measures changes in wage and non-wage labour costs, including the cost to employers of contributing to superannuation schemes. Recent legislative changes to superannuation will affect the June 2012 quarter labour cost index (all labour costs).

From 1 April 2012, there were changes to the employer superannuation contribution tax (ESCT) on employer contributions to superannuation schemes. The ESCT now applies to all KiwiSaver employer contributions. For other superannuation schemes (except defined benefit schemes), the ESCT is now calculated at the employee’s marginal ESCT rate instead of a flat rate of 33 percent.

Employer superannuation contribution tax (ESCT) rate by income bracket
ESCT threshold amount ($)  New ESCT rate (percent)
 0–16,800  10.5
 16,801–57,600  17.5
 57,601–84,000  30
 84,001 and above  33

KiwiSaver

The minimum employer contribution remains at 2 percent of an employee’s gross pay. But with the ESCT being applied to KiwiSaver, employers may either deduct the ESCT from the cash contributions they make to their employees’ schemes, or add ESCT to their cash contributions.

  • If employers elect to deduct the ESCT from cash contributions, they will continue to incur the same gross contribution rates, and employees will receive less in their KiwiSaver accounts.
  • If employers elect to gross up their KiwiSaver contributions, they will contribute higher gross contribution rates, for example, from 2 percent previously to 2.2–3.0 percent (depending on employees’ marginal tax rates), and employees will receive the same contributions in their KiwiSaver accounts.

Other superannuation schemes

Changes in the ESCT rate also affect non-KiwiSaver superannuation schemes (except define benefits schemes).

For these schemes, the effect on employer superannuation contribution rates depends on the collective or individual employment agreements between employers and employees.

  • If agreements specify gross employer contribution rates, the employer contribution rates remain unchanged and employees in the lower tax brackets receive more in their superannuation accounts.
  • If agreements specify net employer contribution rates, the employer contribution rates will be lower (depending on employees’ marginal tax rates) and employees receive the same contributions in their superannuation accounts.

From the LCI superannuation surveys returned to date, it appears that most agreements specify gross contribution rates.

The impact of these legislation changes will be shown in the superannuation costs component of the June 2012 quarter labour cost index (all labour costs) information release on 19 October 2012.

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6. Development updates

New labour cost index series on Infoshare

Historical labour cost index (LCI) distributional information published in the commentary and tables of LCI information releases is now available as time series on Infoshare. This information includes those series that appear in the following information release tables:

  • Distribution of annual movements, all sectors combined (table 6.1)
  • Proportion of salary and wage rates increasing, all sectors combined and private sector (table 6.2)
  • Distribution of annual increases by reason, all sectors combined (table 6.3)
  • Median and mean increase, all sectors combined (table 7.1)
  • Median and mean increase, by sector (table 7.2)

For more information see the ‘data quality’ section in Labour Cost Index (Salary and Wage Rates): March 2012 quarter.

Farewelling old industry classification in the PPI

The basis for classifying industry within the producers price index (PPI) was changed in the March 2011 quarter (see Producers Price Index: March 2011 quarter). The Australian and New Zealand Standard Industrial Classification 1996 (ANZSIC96) was replaced by ANZSIC06.

For the four quarters since the change, indexes have been published using both ANZSIC96 and ANZSIC06. This overlap period ended with the release of Producers Price Index: March 2012 quarter.

The ANZSIC96-based series have now been discontinued. They will remain available on Infoshare, but will not be updated after the March 2012 quarter.

Many users of the ANZSIC96 PPI series have already made the change to the ANZSIC06 series. However, the PPI team will continue to provide support to those who have yet to make the necessary changes.

For assistance or more information, please contact:

Bernard Pullon
Wellington
04 931 4600
info@stats.govt.nz

Annual update of producers price index weights

We recently updated the producers price index (PPI) weights to help maintain the relevance of this index. After implementing the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06) in the March 2011 quarter, the PPI’s industry and commodity weights are able to be updated annually. 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 now being updated annually. 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).

The new weights introduced in the March 2012 quarter come mainly from the 2008/09 SUT. These weights apply from a new price reference period of the December 2011 quarter, and were used to weight price movements from the December 2011 quarter to the March 2012 quarter.

The next planned re-weight will be in the March 2013 quarter, with data mainly coming from the 2009/10 SUT.

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 will survey a sample of economically-significant enterprises operating in New Zealand and collect information from them on their supply and use of goods and services (commodities). We will use this information 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.

This commodity information by industry will also be used to establish lower-level weights for the business price indexes, which are used as deflators in producing a chain-volume measure of GDP.

We carried out the previous PPI redevelopment from 2004 to 2010. The new 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 are being 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.

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

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

CPI rolling review of retail outlets

Statistics NZ has begun a continuing, rolling review of retail outlets visited for the consumers price index (CPI). These retail outlets are those from which prices are collected by Statistics NZ price collectors.

The review will consider:

  • the retail outlets visited by Statistics NZ price collectors
  • the detailed pricing specifications of products for the representative goods and services (items) that are tracked for the CPI at retail outlets.

The first changes will be implemented when the September 2012 quarter index is released in October 2012. Further changes will be incorporated in subsequent quarterly releases.

Outlet samples are being refreshed to ensure the outlets visited reflect where consumers shop. The review will analyse the coverage of retailers and the mix of storetypes for each item.

The review will ensure that the detailed pricing specifications used to select individual products to track for the CPI are fit-for-purpose and that a representative selection of products is priced for each CPI item. We are making use of information from the 2009/10 Household Economic Survey (HES), the Annual Enterprise Survey (AES), Statistics NZ's register of businesses (the Business Frame), and other sources including scanner data obtained from the Nielsen Company.

The CPI retail outlet samples were last reviewed as part of the 2006 CPI review.

CPI items tracked at retail outlets have been organised into eight review groups. The outlets visited and the item pricing specifications will be reviewed for one group each quarter.

For the first review group, we looked at outlets visited for clothing, footwear, and furniture items. Around 30 of 670 retail outlets tracked for this group were replaced. The outlets visited for clothing items have been re-allocated to cover a wider range of retailers (particularly specialist and boutique clothing stores) and give greater coverage of clothing sales at sports and camping stores. Changes made to the furniture outlets were to give increased representation of new furniture retailers and those that have increased in significance since the last CPI retail outlet review.

The eight review groups are:

  • clothing, footwear, and furniture
  • services, vehicles, and personal goods
  • sports and stationery
  • consumer electronics (annual review)
  • convenience stores
  • supermarkets: food
  • supermarkets: non-food
  • consumer electronics (annual review).

For more information on the CPI rolling retail outlet review, please contact:

Alan Bentley
Wellington
04 931 4600
info@stats.govt.nz

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7. Making contact

CPI revision advisory committee in 2013 – let us know your topics

Statistics NZ plans to convene a consumers price index (CPI) revision advisory committee. This committee will meet in March or April 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. We will seek nominations for committee members from CPI customers.

Please let us know the topics that you would like to see considered by the 2013 CPI revision advisory committee. You can email your suggestions to: cpireview@stats.govt.nz or ring Peter Campion.

Background and discussion papers prepared by Statistics NZ for the committee will be available to the public on the Statistics NZ website (www.stats.govt.nz). We will call for public submissions before the committee meeting.

The last CPI revision advisory committee was held in June 2004, with its recommendations informing the 2006 CPI review. For the papers prepared for the committee and the committee’s report (including 20 recommendations), see 2004 CPI Revision Advisory Committee.
   
For more information on the 2013 CPI revision advisory committee, please contact:

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

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8. Release dates

Price index release calendar for the next three months

M= Media conference

July 2012

Thu 12 Food Price Index: June 2012
Tue 17 Consumers Price Index: June 2012 quarter

August 2012

Tue 7 M Labour Cost Index (Salary and Wage Rates): June 2012 quarter
Mon 13   Food Price Index: July 2012
Fri 17 M Producers Price Index: June 2012 quarter
Fri  17 M Capital Goods Price Index: June 2012 quarter

September 2012

Mon 3 M Overseas Trade Indexes (Prices): June 2012 quarter (provisional)
Mon 3 M Overseas Trade Indexes (Volumes): June 2012 quarter (provisional)
Fri 14 Food Price Index: August 2012

This issue of Price Index News was released on Wednesday 11 July, 2012

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