Price index developments

Introduction

Statistics New Zealand produces a range of different price indexes. These include:

  • Consumers Price Index (CPI), which measures the quarterly rate of price change of goods and services purchased by private households
  • Food Price Index (FPI), which measures the monthly rate of price change of food and food services purchased by private households
  • quarterly Producers Price Index (PPI), which measures changes in the levels of prices in the production sector of the economy. The PPI is made up of two types of indexes: the outputs indexes measuring changes in the prices received by producers, and the inputs indexes measuring changes in the cost of production (excluding labour and capital costs)
  • Capital Goods Price Index (CGPI), which measures price changes for six groups of physical capital assets purchased by producers of goods and services
  • Labour Cost Index (LCI), which measures changes in base salary and ordinary time wage rates, overtime wage rates, and non-wage labour-related costs (eg annual leave, superannuation and medical insurance)
  • Overseas Trade indexes, which measure changes in the prices of imports and exports of goods and services to and from New Zealand.
  • Statistics New Zealand regularly reviews the methods and practices used to compile these indexes. The aim of this review programme is to ensure that the indexes remain relevant, of good quality and, where possible, follow international best practice guidelines.

Further information about Prices and inflation

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Consumers Price Index

New goods and the CPI

The appearance of new goods and services in the market presents a challenge for the compilers of consumer price indexes. The New Zealand CPI uses a fixed basket approach, so new goods are generally added only when the basket is reviewed and reweighted. For example, at the 2006 review of the CPI, goods added to the basket included MP3 players, DVD players/recorders and flat panel televisions.

The CPI is subject to a form of potential measurement bias called ‘new goods bias’. The longer it takes to add new goods to the basket, the larger the potential bias.

Statistics NZ presented a research paper on this issue at the 2006 New Zealand Association of Economists conference held in Wellington. The paper summarises the concept of new goods bias and describes the treatment of new goods in the CPI. The paper also presents an empirical analysis of the potential impact on the index of:

  • when new consumer electronic goods are added to the CPI basket
  • the expenditure weights assigned to these goods.

The goods examined are digital cameras, DVD players/recorders and flat panel televisions.

Consumers Price Index retrospective superlative index

2007 Paper

An information paper, released on 2 February 2007, outlines details of a Consumers Price Index (CPI) retrospective superlative index calculated between the June 2002 quarter and the June 2006 quarter. The paper also details what expenditure weights for purchase and construction of new dwellings and for rented dwellings in the CPI would have been in 2002, had an alternative method been used.

2008 Paper

An information paper which builds on the 2007 paper was released on 25 November 2008. This paper presents results of a retrospective superlative index calculated between the June 2006 quarter and the June 2008 quarter, extending the existing time series by a further two years.

Review of CPI regions

Statistics New Zealand has reviewed the regional collection, compilation and publication practices used in the Consumers Price Index (CPI) in the lead-up to the introduction of the revised CPI in October 2006.

Review of CPI classification system

Statistics New Zealand is currently reviewing the classification system used to classify goods and services in the CPI ‘basket’. The 2004 CPI Revision Advisory Committee recommended that Statistics New Zealand base the CPI classification system on the upper level of the international standard Classification of Individual Consumption According to Purpose (COICOP). Statistics New Zealand has prepared a discussion paper on the review of the classification system. This paper presents a range of options for the upper-level structure, and recommends a proposed approach.

For further information on the review, please contact:
Peter Campion
Statistics New Zealand
PO Box 2922
Wellington
E-mail: info@stats.govt.nz

Submissions on this paper closed on Friday, 9 September 2005.

Tradables and non-tradeables series methodology

Statistics New Zealand produces index series that group goods and services within the CPI into two components: those that are imported or in competition with foreign goods, either in domestic or foreign markets (tradables); and those that face no foreign competition (non-tradables). An information paper, published in December 2004, outlines how these groupings are decided and the methodology behind the groupings.

Paper on the CPI Tradable and Non-tradable Series

2004 Revision Advisory Committee

In June 2004 the CPI Revision Advisory Committee met to undertake an independent review of the practices and methods used to compile the CPI. The committee's recommendations will play a major part in shaping the revised CPI, due for introduction with the release of the September 2006 quarter index in October 2006.

Further information about the 2004 CPI Revision Advisory Committee