1. Background
The Overseas Trade in Services Price Indexes were first developed in 1999, to complement existing price and volume indexes for merchandise trade. Statistics New Zealand has been progressively reviewing the services price indexes since 2005, to ensure that they remain relevant. International sea transport plays a significant role in overseas trade in services. In terms of weights, sea transport accounted for 18.6 percent for total import services, and 5.8 percent for total export services as at the June 2006 quarter. The sea freight import and export indexes are main sub-indexes for sea transport. As part of the wider redevelopment project (please see Price Index News April 2007), the redeveloped sea freight export and import indexes were implemented in the June 2006 quarter.
Please see the appendix for more information on the redevelopment project and the structure of services price indexes.
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2. Classifications and scope
Classifications
Overseas trade in services price indexes follow the fundamental principles of the Balance of Payments Manual, fifth edition (BPM5) for the definition of services for trade. The Balance of Payments Sources and Methods: 2001, published by Statistics NZ, defines freight services as services "performed by residents and foreign residents on the movement of goods".
Balance of Payments assumes that the shipment of goods always begins at the customs frontier of the exporting country. The main purpose of specifying the customs frontier is to provide a basis for recording the shipment of merchandise, so there is a consistent free on board (fob) valuation basis for the merchandise component.
For example, the shipment of New Zealand goods beyond the customs frontier is treated as a service performed for the importer. Balance of Payments Sources and Methods: 2001 explains how credits (exports) or debits (imports) are determined:
- Enter as credits [exports] all services performed by New Zealand residents on its exports, once these have been loaded on board the carrier at the New Zealand customs frontier.
- Enter as debits [imports] all services performed by foreign residents on New Zealand imports, once these have been loaded on board the carrier at the customs frontier of the country from which they are exported.
The redeveloped sea freight indexes follow the BPM5 definitions, by specifying where the traded goods are from or being exported to, and which service providers (whether or not they are New Zealand owned) provide sea freight services to whom.
Scope: exclusions
According to the Balance of Payments Sources and Methods, some items are excluded from sea freight, such as:
- freight insurance (this is included in insurance services)
- repairs of port and airfield facilities (this is included in construction services)
- goods procured in ports by non-resident carriers, and repairs on vessels and aircraft (this is included in merchandise goods traded)
- rentals and charters of carriers without crew (this is included in operational leasing services).
The redevelopment project ensures that the redeveloped indexes reflect all of the above.
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3. Sample design and weighting structure
Sampling
The design of the survey (Commodity Price Survey) is mainly dependent on the methodology of the redevelopment project and sampling design. Sampling was mainly based on the size of the sea freight service providers, as measured by Statistics NZ's Business Frame and the Resident Shipping Questionnaire survey (Balance of Payments).
After using various data sources to estimate market shares, purposive (or judgement-based) sampling was used, where respondents were selected based on their size (that is, revenue earned). The population of service providers was considered too small to employ sample rotation or random sampling techniques. The sampling process was considered important for this project, to ensure that the services being surveyed are representative of the real economy.
Weighting structure
To select representative sea freight transport services for the Commodity Price Survey, the weighting structure was used as its basis. The weight structure for the sea freight indexes is based on four different determinants:
- origin and destination of transport
- volume of goods traded
- type of freight
- type of containers.
Various overseas trade data was used to determine the most popular export destinations and imports origins, and the most popular goods traded from/to New Zealand. Information on type of freight and type of containers was gathered from selected respondents in the sample.
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4. Main pricing methods
The redeveloped sea freight indexes use contract pricing for scheduled transport. This means that actual prices are collected, not list prices or quote prices given to clients (people who purchase the service).
The Commodity Price Survey collects actual prices (including any discounts) for transport between the same origin and destination countries, and for the same container, repeated on an ongoing basis. It is also expected that the service is provided to the same set of clients, who are not under a special contract or one-off service contract. One-off contract prices and spot-market price methods are excluded as pricing methods as it is difficult to define representative sea freight services that are comparable over time.
Any surcharges for the client are included in pricing. The most common surcharges are a fuel adjustment factor, currency adjustment factor and bulk adjusting factor. Respondents are also asked to specify the surcharges every quarter, if available.
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5. Collection of information and specification of services
The most important objective of the redevelopment project was to ensure that the sea freight services selected for price collection are representative of the real world.
In consultation with the respondents, Statistics NZ set up specific service descriptions for which to collect prices.
Some important factors that determined the description of the services that respondents supply prices for are:
- origin and destination of the sea freight
- type of containers
- size of containers
- surcharges (fuel adjustment factor, currency adjustment factor, bulk adjusting factor etc)
- type of freight – the type of goods being transported (eg vehicles, petroleum, general goods etc)
- services expressed in New Zealand dollar or foreign currencies.
Pricing information used for calculating indexes is obtained from the Commodity Price Survey. Prices are collected each quarter, as at the 15th of the middle month of the quarter. Prices collected in foreign currencies are converted, using the exchange rates supplied by Westpac Bank for the 15th day of the middle month of the quarter for the relevant currencies. Respondents are asked to choose their preferred currencies on the questionnaire as sea freight services are often charged in foreign currencies.
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6. Improvements
There are four main improvements from the redevelopment for the sea freight indexes.
- The redeveloped sea freight import and export indexes have more specific and detailed price descriptions which are more representative.
- There is a definite distinction between exports and imports, by clarifying ownership of the firm – this also follows the BPM5's definitions.
- Weights were updated according to the significance of the specific service provided and the size of the company.
- The methodology has been updated so that modern container-based sea freight transport services are surveyed.
Precise specification of transport services is necessary to maintain the quality of the indexes, and Statistics NZ has an ongoing quality monitoring programme to ensure that this is achieved.
For further information please contact:
Daria Kwon
Wellington 04 931 4600
Email: info@stats.govt.nz
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7. Appendix
The redevelopment project
The Overseas Trade in Services Price Indexes were first developed in 1999, to complement existing price and volume indexes for merchandise trade. Statistics NZ has been progressively reviewing the services prices indexes since 2005, to ensure that they remain relevant.
The services redevelopment project, which is being implemented on a rolling basis, aims to:
- review and update the sample of service prices included in the indexes, to ensure the product specifications remain representative
- review and update the sample of respondents, to ensure it adequately covers the importers and exporters of services
- reweight the lower levels of the indexes (below the published level), to ensure they reflect the relevant patterns of transactions
- re-express the services price indexes on a June 2002 quarter base.
However, the project excludes any changes to the scope of services covered by the indexes and the conceptual basis of the indexes.
The structure of services indexes
The diagram below illustrates how the Overseas Trade in Services Price Indexes are structured, using transport export services as an example.
This structure is identical for imports and exports for transport services. Sometimes the index structure may differ, depending on the industry for imports and exports. The published levels are level 1 (total export services or import services) and level 2 (transport, travel, government and other).
The redevelopment project's focus is to reweight level 5, the lowest level of the index structure (above the surveyed prices). The surveyed prices which feed into level 5 are being updated and reweighted. The levels above (levels 2 to 4) are reweighted every June quarter, mainly using Balance of Payments information.
The table above is a summary of weights as at the June 2006 quarter. The services indexes are an annually chain-linked Laspeyres price index series. Weights are determined by the relative importance of services and businesses within the service industry and the weights are updated every June quarter. Information from Balance of Payments and various surveys, censuses and other sources is used to determine the weights.
Back to Price Index News: July 2007