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Price Index News: October 2016

1.  Short stories

Household living-costs price indexes
This paper provides information about a new set of price indexes that measure the inflation experience of groups of households.

What has caused inflation since 2006
This article shows where household inflation has – and hasn’t – come from in New Zealand over the 10 years from 2006 to 2016. 

2.  Working with others

Prices research and development from New Zealand goes global

In August, senior researcher Frances Krsinich attended a sprint workshop in Budapest, organised by the High-level group for the modernisation of official statistics, recently renamed ‘Modernstats’.

Statistics NZ is involved in three work packages within the data integration project of the group. We have proposed lodging scanner and online research data within the Irish Statistical Office’s sandbox environment, to enable collaborative research and development across official statistical agencies. This will help develop ‘hybrid’ big-data price indexes, which utilise both the high-frequency, timely nature of online data and the expenditure information available in scanner data.

Frances then travelled to Dublin to present Measuring price change from big data in New Zealand (PDF, 8p) in the Access and Partnerships session of the United Nations International Conference on Big Data for Official Statistics.

Following the conference, two Statistics NZ colleagues (Evelyn Wareham and Anna McDowell) joined Frances at the European Commission’s meeting on Big Data for Science and Policy, held at their Joint Research Centre in Ispra, Italy.

Alongside Evelyn and Anna’s presentation on the Integrated Data Infrastructure, Frances talked about our success in implementing consumer electronics scanner data in producing New Zealand’s CPI, and our active research and development in the area of web-scraped online data for price measurement.

Investigating the potential of online data

We recently signed up to purchase a year’s-worth of daily web-scraped online price data from US-based company PriceStats, the commercial counterpart of MIT’s Billion Prices Project.

This data captures, in real-time, online prices for a wide range of different New Zealand retailers. It will enable us to do detailed research on the potential for enhancing and improving our current data collections and price measurement.

Our recently published work on a new methodology for this type of data [The FEWS index: Fixed effects with a window splice] will enable us to produce quality-adjusted, non-revisable price indexes from online data. In combination with expenditure information from the household expenditure survey, or scanner data, it also presents a rich opportunity for more frequent and timely price indicators than are currently available.


3.  On the horizon

Local authority rates

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 them annually.

While newly set rates all take effect from 1 July, not all territorial authorities and regional councils set them in the September quarter. However, 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’s 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 September 2016 CPI quarter, published in October 2016, we’ll include 90 percent of the weight of the local authority rates sample.

Alcohol excise duty increases

The annual indexation adjustment of the excise duty on alcoholic drinks occurred on 1 July 2016. The adjustment was a 0.42 percent increase in the excise duty, based on a 0.4 percent increase in the 'CPI less credit services' index from the March 2015 quarter to the March 2016 quarter, published on 18 April 2016.

We expect the effect on retail prices to show fully in the September 2016 quarter’s CPI, but this depends on the timing of price increases in pubs, clubs, restaurants, and liquor stores, and when we collected the prices.

Decreases within the CPI ‘other private transport services’

On 1 July 2016 vehicle relicensing fees changed, amending changes to the way ACC calculated levies for light vehicles in 1 July 2015. Vehicle relicensing fees represented just over 2/5ths of the weight of the ‘other private transport services’ class at the June 2016 quarter. The fees will show a price fall in the September 2016 quarter’s CPI.

4.  Development updates

CPI review in 2017

We recently began work on the CPI review 2017, as part of our Prices Innovation and Relevance programme.

The purpose of the review is to maintain the relevance of the index by updating the: 

  • basket of goods and services
  • expenditure weights.

We’ve been cleaning and analysing the latest Household Economic Survey expenditure data for the year to June 2016. This survey data is the bedrock for the basket and weight updates. Results from the latest survey will be published in Household Expenditure Statistics: Year ended June 2016 on 24 November 2016.

We will duel-price the basket changes, and triangulate the survey data with administrative sources during early to mid-2017. The 2017 review will be implemented in the September 2017 quarter’s CPI, to be published in October 2017.

Ongoing updates

As part of our work to ensure the CPI remains relevant and up-to-date, we also undertake rolling reviews between our three-yearly updates of the CPI basket and weights. The focus of the 2015/16 rolling review was to review our postal survey collections – to ensure prices are collected efficiently and continue to be relevant.

We are incorporating refreshed samples for health services, trades (electricians, plumbers, and painters), solicitor fees, and real estate fees with the December 2016 quarter’s CPI release.

For more information on the CPI review 2017 contact:

Katrina Dewbery or 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 reweight the industries at the New Zealand Standard Industry Output Categories level 4 and above (there are 118 level 4 industries).

See New Zealand Standard Industry Output Categories classification tables for details.

We introduced the latest weights in the PPI tables for the March 2016 quarter’s business price indexes release, based on the 2012/13 SUT. These weights were first used to weight price movements from the December 2015 quarter to the March 2016 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 (BPI): the producers price index (PPI), the farm expenses price index, 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 New Zealand's 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 and indexes:

  • capital goods price index
  • road transport and other transport
  • wood product manufacturing
  • pulp, paper, and converted paper manufacturing
  • heavy and civil engineering construction
  • construction trade 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.

Implemented in the December 2015 quarter:

  • meat and meat product manufacturing
  • dairy product manufacturing
  • fruit, oil, cereal, and other food product manufacturing
  • beverage product manufacturing
  • building construction.

Implemented in the June 2016 quarter:

  • mining.

All other industries we are currently reviewing will have lower-level PPI commodity weights and updated product samples implemented after the September 2016 quarter. We will publish an updated list of these industries in future editions of Price Index News.

For more information about the rolling BPI review, please contact:

James Griffin
Wellington 04 931 4600 or 0508 525 525

LCI non-wage indicators – through administrative data

In 2015 we proposed discontinuing the Labour Cost Index (All Labour Costs) information release. As a result, we stopped publishing the non-wage portion of the labour costs statistics; the salary and wage rates portion continues to be produced within the Labour Market Statistics release.

See public consultation on proposal to discontinue labour cost index non-wage statistics for more about the process.

We have been looking at possible alternatives to replace the non-wage data we no longer collect from a survey. In late October 2016 we will release the first experimental indexes based on Inland Revenue admin data. These indexes focus on two components of the non-wage labour costs – superannuation and fringe benefit tax.

Keep an eye out for the new indexes. We’d like to receive your comments about their relevance and consistency. We’ll use the feedback collected over the six months after publication to decide on the future of the indexes. This could mean improvements or additional information being released.

For more information about the non-wage labour costs through admin data, please contact:

Matthew Stansfield
Wellington 04 931 4534

5.  Release dates

Price index release calendar for the next three months

October 2016

13 October:    Food Price Index: September 2016

18 October:    Consumers Price Index: September 2016 quarter

November 2016

2 November:    Labour Market Statistics: September 2016 quarter

8 November:    Household living-costs price indexes:

11 November:  Food Price Index: October 2016

17 November:  Business Price Indexes: September 2016 quarter

December 2016

1 December:    Overseas Trade Indexes (Prices and Volumes): September 2016 quarter (provisional)

13 December:  Food Price Index: November 2016

This issue of Price Index News was released on Thursday 6 October 2016.

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