What the food price index measures
The food price index (FPI) measures the rate of price change of food and food services purchased by households. The food group is the only commodity group of the consumers price index (CPI) for which an index is prepared each month. The all groups CPI is prepared quarterly. The concepts, sources, and methods used to compile food prices are explained in the Food prices in the consumers price index and food price index article available on the Statistics NZ website.
Index series available online from Infoshare
To access more data from the FPI series, go to Infoshare at www.stats.govt.nz/infoshare, and choose:
Subject category: Economic indicators
Group: Consumers Price Index
The FPI series are listed immediately after the CPI series.
The time series can be downloaded in Excel or comma delimited format, where percentage movements can be calculated using the following formula:
((Index number for later period minus index number for earlier period) divided by index number for earlier period) multiplied by 100.
More information about Infoshare.
Distribution of item-level index movements
The 'Distribution of item-level index movements' table in the 'Commentary' section of this information release gives additional information on the distribution of price movements recorded for the current month's FPI. The analytical statistics in the table give an indication of how widespread price changes are, and their relative magnitude compared with previous months.
Grocery food specials
Items that are 'on special' or come 'off special' are included in the FPI at the price levels observed at the time prices are collected. An analysis of the price quotes for these items is often given for the grocery food and non-alcoholic beverages subgroups in the 'Commentary' section of this information release. To be included in this analysis, the priced item will have been on special either last month or this month, or have been on special in both months.
Seasonal availability of fruit and vegetables
Fruit and vegetable prices are reflected in the FPI when there is enough produce available to estimate representative average prices. For example, prices for nectarines are historically not included in the April and May FPI. Similarly, prices for strawberries are not been included in the May and June FPI. This is because not enough prices can be collected from stores during these months. No price change is shown in the FPI for these items during these months. When produce returns to sufficient levels, the prices are again reflected in the FPI. Price movements then reflect the price change from the month that the item was last included to the current month. However, in June 2010, insufficient prices were collected for nectarines and they were not included in the FPI. This resulted in no price movement being shown for nectarines for June 2010. This will have had a dampening effect on fruit prices, and to a smaller degree, the fruit and vegetables subgroup and the FPI. Nectarines returned in sufficient quantities to be included in the FPI in July 2010. The resulting nectarine price movement shown in the July 2010 FPI was the change from prices recorded in March to those recorded in July, one month longer than usual.
Sample of outlets
Prices are collected from a sample of retail outlets. This sample was selected as part of the 2006 FPI review. The last selection of outlets took place with the 1999 FPI review. As a result of the 2006 FPI review, the price collection effort was redistributed to align more closely with the population shares of the regions. This redistribution means more prices are collected in the larger pricing centres, particularly Auckland. The objective of this re-allocation is to maximise the accuracy of the national FPI while taking into account a secondary requirement to produce regional indexes of good quality.
Food prices are collected from about 650 outlets in the 15 surveyed urban areas. Of these, about 75 are supermarkets, 30 greengrocers, 30 fish shops, 30 butchers, 50 convenience stores (with half being service stations and the other half being dairies, grocery stores, and superettes), 120 restaurants (for evening meals), and more than 300 are other suitable outlets (for breakfast, lunch, and takeaway food).
Review of the food price index
The FPI was reviewed in 2008 as part of the regular review of the consumers price index (CPI). The review encompassed the reselection of the basket of representative food goods and services and the reweighting of the basket to reflect the relative importance of household spending on food.
The item pricing specifications were also updated, and the sample of product sizes, brands, and varieties has been reselected in some cases. Price collectors were also given more guidance about specific brand-share targets for selected goods by using summary information collated from supermarket scan data obtained from the Nielsen Company. The guidance ensures that the mix of brands in the FPI price samples reflects market shares.
The updated FPI sample of products was selected in April 2008. Price collection for the existing and new samples ran alongside each other until June 2008, when collection for the old index ceased.
Pricing coverage and timing
Prices are surveyed in 15 urban areas: Whangarei, Auckland, Hamilton, Tauranga, Rotorua, Napier-Hastings, New Plymouth, Wanganui, Palmerston North, Wellington, Nelson, Christchurch, Timaru, Dunedin, and Invercargill.
Fresh fruit and vegetable prices are surveyed weekly, and the remaining food prices are generally surveyed between the 8th and 16th of the month, although sometimes surveying starts and finishes earlier or later.
The main source of information used to weight the FPI basket is the 2006/07 Household Economic Survey (HES), which collected detailed information on the spending patterns of about 2,600 households. However, because HES does not provide accurate information for some food items, such as confectionery and soft drinks, information was also sourced from food manufacturers and distributors, and from supermarket scan data (from the Nielsen Company).
The initial weights for the year to June 2007 (the weight reference period) were 'price updated' to the June 2008 month (the price reference period). This updating involved expressing the underlying quantities of the weight reference period in the prices of the price reference period. The initial weights indicated that households spent $13.263 billion on food during the year to June 2007 (2006/07). When the food consumed during 2006/07 is expressed in prices that were current at June 2008, the amount spent on food rises to $14.583 billion (10.0 percent higher, due to increased food prices since 2006/07).
Table 4 (in the 'Tables' section of this information release) gives the expenditure weights, at the June 2008 month, for the reweighted FPI. It shows 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.
Regional population weights
Regional population weights are used to allocate the national expenditure weights of goods and services derived from the HES and other sources to the FPI pricing centres. For example, the population weights ensure that a given price change in Auckland, with a population weight of 32.98 percent, would have nearly three times the effect on the national FPI than the same movement in Christchurch, which has a population weight of 11.55 percent.
The population weights, which appear in table 5, were calculated by making use of local government boundaries. The 2008 weights were derived by assigning the census usually resident population of each regional council area (at June 2007) to the pricing centre(s) within the region.
For three regional council areas, Bay of Plenty, Manawatu-Wanganui, and Canterbury, there are two pricing centres in each region. The proportion of the regional council area population allocated to each pricing centre was based on the population of the pricing centre's territorial authority.
The four regions without a pricing centre had their populations allocated to the nearest pricing centre. The Gisborne region's population was allocated to the Napier-Hastings pricing centre, and the Marlborough, Tasman, and West Coast regions were allocated to the Nelson pricing centre.
The population weights used previously were based on the census usually resident population at June 2005.
As well as allocating population weights to the 15 FPI pricing centres, Statistics NZ is also publishing the FPI and CPI for five broad regions based on regional council area boundaries. These regions are Auckland, Wellington, Rest of North Island, Canterbury, and Rest of South Island. The population weights of these broad regions are also given in table 5.
Elementary aggregate formulae
Regional elementary aggregates are calculated for each of the 15 pricing centres from all prices collected for an item within that region. Regional elementary aggregates are calculated using a 'geometric mean of price relatives', or Jevons formula.
The Jevons formula is used to calculate average prices for all food goods and services in the basket, except for fresh fruit and fresh vegetables. The Jevons formula assumes that households spend the same amount at each surveyed outlet in each period. This implies that increased quantities are purchased from outlets showing lower-than-average relative price change and decreased quantities from outlets showing higher-than-average price change.
The Jevons formula is:
In practice, Statistics NZ uses a weighted geometric mean formula, with the weights, where available, representing the relative importance of outlet types such as supermarkets relative to convenience stores and the relative importance of individual outlets (eg supermarket chains).
As four or five prices (depending on how many Fridays fall within a given month) are collected each month for fresh fruit and vegetables, the 'arithmetic mean of price relatives' or Dutot formula is used, as the first stage of aggregation is across both outlets within each region and across weeks within each month.
The Dutot formula is:
In practice, Statistics NZ uses a weighted arithmetic mean formula, with the weights, where available, representing the relative importance of outlet types such as supermarkets relative to convenience stores, and the relative importance of individual outlets (eg supermarket chains).
Average prices of selected food items (table 3)
Table 3 contains a selection of average retail prices for the current and previous month. The weighted average prices are calculated by applying index movements to weighted average prices calculated for the June 2006 month. The weighted average prices are not statistically accurate measures of average transaction price levels, but do provide a reliable indicator of percentage changes in prices.
As the weighted average prices are calculated from the prices at the June 2006 month, these are not strictly comparable with weighted average prices published before the July 2006 month (when the new June 2006 weighted average price based on the June 2006 sample of prices was published). Further, other methodological changes that will cause the weighted average prices based on the June 2006 average prices to differ from the previously published ones include:
- the adoption of the geometric mean formula for all food goods and services, other than fresh fruit and vegetables
- an updated relative importance of sampled outlet types (eg supermarkets and convenience stores) and sample outlets (eg supermarket chains)
- an updated mix of surveyed brands, varieties, and sizes
- the changes that have been made in the reference size in the 'unit' column of table 3 for some items.
For any given set of prices, the use of the geometric mean formula will result in prices being less than or equal to an arithmetic mean price. This means that the June 2006 month average prices in table 3, for items other than fresh fruit and vegetables, are in many cases lower than those that appeared in the June 2006 information release.
Seasonal effects – fresh fruit and vegetables
Until the June 2006 month, fresh fruit and vegetable items that exhibited a seasonal pattern were adjusted to remove the effect of normal seasonal change. This treatment was used to reduce the influence of normal seasonal price fluctuations. However, the treatment did not completely eliminate the effects of seasonal fluctuations if shifts in seasonal patterns occurred.
From the July 2006 month onwards, the FPI incorporates seasonally unadjusted prices for fresh fruit and vegetables. This change is in line with a recommendation made by the 2004 CPI Revision Advisory Committee.
The ongoing, fully unadjusted FPI is linked at the June 2006 month to the previously published FPI, which is partly seasonally adjusted. As such, annual movements calculated over the annual period encompassing the June 2006 month were based on fully unadjusted index numbers for the latest month, compared with partly adjusted index numbers for the same month of the previous year.
During the year-long transition of the official FPI, two sets of index numbers were supplied in table 3 of the FPI release: the index numbers for the FPI which were seasonally adjusted until the June 2006 month (the official FPI series) and the fully seasonally unadjusted analytical series which go back to the June 1999 month.
For more information, follow the link from the technical notes of this release on the Statistics NZ website.
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