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Price Index News: September 2008

1. Short stories

Fancy cheese flatter than family block

According to the food price index (FPI), retail cheese prices rose more than 40 percent in the year to July 2008. Fancy cheese flatter than family block shows that, of the different types of cheese tracked for the FPI, the family block of cheddar has risen in price by more than the gourmet round of camembert.

Lighter lettuce leaves hole in hip pocket

Lettuce prices rose 34 percent in August 2008, the fourth month running that prices have risen by over 30 percent. While it is not unusual for lettuce prices to rise in winter months, the strength of recent rises has lifted prices to historic highs. The article Lighter lettuce leaves hole in hip pocket digs into what's happened to the price and size of lettuces over the winter months.

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2. Working with others

International conferences on consumer price indexes

The latest United Nations Economic Commission for Europe (UNECE)/International Labour Office (ILO) joint meeting on consumer price indexes was held in Geneva in May 2008. The meeting was preceded by a meeting on consumer price indexes for countries with economies in transition. John Morris (Manager – Prices, at Statistics New Zealand at the time) attended the meetings and reports on what was discussed in International conferences on consumer price indexes.

International Comparison Programme update

Global purchasing power parities (PPP) and real expenditures from the 2005 International Comparison Programme (ICP) were released recently. International Comparison Programme update provides a link to the report of the 2005 ICP round, and a link to the latest issue of the ICP Bulletin.

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3. Virtual papers

Updating the food price index basket

Statistics NZ has reviewed the goods and services included in the food price index (FPI) basket and updated their relative importance. Seven new food items have been added to the basket, including fresh pineapple, soy milk, free-range eggs, hummus dip and chilled fruit juice. The four items removed from the basket include fresh peaches, saveloys and condensed milk.

The new relative importance of the FPI subgroups indicate that about $21 of every $100 spent by households on food is spent on eating out or takeaways. About $17 of every $100 spent on food is on meat, poultry and fish, and about $14 is on fruit and vegetables. Non-alcoholic beverages such as coffee, soft drinks and fruit juice account for $10, and the remaining $38 is spent on grocery food.

Updating the food price index basket is a poster that shows summary information about the 2008 FPI review.

There is also a section at the end of the July 2008 FPI Hot Off The Press information release commentary about the review.

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4. Nuts and bolts

Vehicle fuels and lubricants in the consumers price index

Vehicle fuels and lubricants had a combined expenditure weight of 5.81 percent in the consumers price index (CPI) at the June 2006 quarter. The sources and methods used to compile this important part of the index are explained in Vehicle fuels and lubricants in the CPI.

The food price index basket

The food price index (FPI) measures the rate of price change of food goods and services purchased by households. Following a recent review of the FPI (see the 'virtual papers' section of this newsletter for more information), the index is calculated by tracking changes in the prices of a basket of 157 representative food goods and services. Statistics NZ publishes FPI indexes for five subgroups, 14 classes; and 17 sections within the meat and poultry class, the bread and cereals class, and the milk, cheese and eggs class. Weighted average retail prices are also published for 44 selected food goods and services.

The following spreadsheet provides updated information (including changes made as part of the recent review) about the types of food goods and services within each of the 14 FPI classes: Food price index basket (within class)

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5. On the horizon

Increase in charges or fees within the consumers price index other private transport services class

The consumers price index (CPI) other private transport services class contains such services as vehicle relicensing, driver licensing, warrants of fitness, road user charges, parking services and driving tuition.

Prices for road user charges and vehicle relicensing, administered by the NZ Transport Agency, rose on 1 July 2008. Diesel vehicle road user charges rose by varying amounts across the many types of licences issued. Prices used in the CPI represent diesel vehicles owned and operated by private New Zealand households. These price increases will be fully reflected in the September 2008 quarter CPI.

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 strike their rates annually. While normally any rate changes come into effect from 1 July, not all territorial authorities and regional councils set rates during the September quarter. The small number of rates struck after the September quarter, combined with the timing of survey returns and processing, result in rates changes being shown in both the September and December quarter CPIs. 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.

More information on local authority rates can be found in the October 2007 Price Index News article Local authority rates in the CPI.

Alcohol excise duty increase

The annual indexation adjustment of the excise duty on alcoholic drinks occurred on 1 July 2008. The adjustment was a 3.465 percent increase in the excise duty, based on the movement in the 'CPI less credit services index' from the March 2007 quarter to the March 2008 quarter. In previous years, the annual indexation of excise duty took effect on 1 June.

The impact on retail prices should be fully shown in the CPI for the September 2008 quarter, depending on the timing of price increases in stores and of price collection by Statistics NZ staff.

Employer KiwiSaver contributions

From 1 April 2008, employers have been making compulsory contributions to their employees' KiwiSaver schemes. Employer contributions were set at 1 percent of their employees' gross salary or wages from 1 April 2008, with contributions increasing by 1 percent each year, to a maximum of 4 percent by 1 April 2011. Additionally, employers can receive a tax credit of up to $20 a week per employee, to assist in offsetting the cost of making compulsory employer contributions.

Statistics NZ has been surveying businesses that are part of the labour cost index sample to collect information on KiwiSaver employer contributions. The effect of the tax credit will be taken into account, based on summary information from administrative sources.

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). The impact of employer KiwiSaver net contributions on the cost of providing superannuation, which is expected to be small in the first year because of the tax credit, will be shown in the Labour Cost Index (All Labour Costs): June 2008 quarter Hot Off The Press.

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6. Development updates

Consumers price index review

A minor review of the consumers price index (CPI) will be implemented when the September 2008 quarter index is released in October 2008. The review focused on reselecting and reweighting the basket of representative goods and services, using information from the 2006/07 Household Economic Survey (HES) and other sources.

The contents of the basket were reviewed, as were the pricing specifications of the products being tracked to ensure they remain representative of household purchases. Price collection for basket additions has been implemented.

The reweighted food price index was published for the July 2008 month on 25 August. For more information, see the 'virtual papers' section of this newsletter.

The reweighted CPI for the September 2008 quarter will be released on 21 October. An information paper about the review, including the new set of CPI weights and details of basket changes, will be released on 7 October 2008, two weeks before the September quarter CPI.

For further information on aspects of the 2008 CPI review please contact:

Chris Pike
Wellington 04 931 4600
Email: info@stats.govt.nz

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 will be 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 first reweighted indexes will be released for the September 2008 quarter (wage and salary rates), on 3 November 2008, and the June 2009 quarter (non-wage labour costs). The reweight will be based on the existing LCI sample and the existing industry and occupation groups.

Following the reweight using the existing classifications, we plan to implement more up-to-date industry (Australian and New Zealand Standard Industrial Classification 2006), and occupation (Australian and New Zealand Standard Classification of Occupations) classifications 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 wage and salary rates information release. First QES results using the new industry classification should be released at about the same time.

Recent work on the review has focused on reviewing the sectors of ownership and industries that survey respondents are classified to, and on analysing 2006 Census and associated information at the industry by sector of ownership level (to ensure fitness for use in reweighting the LCI).

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

As stated previously, Statistics NZ is progressively redeveloping a suite of business price indexes, which includes the producers price index (PPI), the farm expenses price index (FEPI) and the capital goods price index (CGPI). This note provides an update on recent progress.

Redevelopment is now under way on the following indexes:

  • FEPI
  • rubber, plastics and other chemical manufacturing
  • legal and accounting services
  • water transport
  • other transport and storage services
  • 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
  • cultural and recreational services
  • education
  • 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
  • fishing
  • petroleum, coal and basic chemical manufacturing
  • non-metallic mineral product manufacturing
  • heavy and civil engineering
  • construction trade services
  • retail trade
  • telecommunication services
  • finance
  • insurance
  • services to finance and insurance
  • ownership of owner-occupied dwellings
  • mining.

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.

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

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7. 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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8. Release dates

Price index release calendar for the next three months

M = Media conference

October 2008

Tue 7 Consumers Price Index Review: Information paper
Fri 17 Labour Cost Index (All Labour Costs): June 2008 quarter
Tue 21 M Consumers Price Index: September 2008 quarter
Food Price Index: September 2008

November 2008

Mon 3 M Labour Cost Index (Salary and Wage Rates): September 2008 quarter
Mon 17 Food Price Index: October 2008
Wed 19 M Producers Price Index: September 2008 quarter
Capital Goods Price Index: September 2008 quarter

December 2008

Wed 10 M Overseas Trade Price Index (Prices): September 2008 quarter (provisional)
Overseas Trade Price Index (Volumes): September 2008 quarter (provisional)
Thur 11 Food Price Index: November 2008
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