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Consumers Price Index: September 2014 quarter
Embargoed until 10:45am  –  23 October 2014
Commentary

CPI rises 0.3 percent in September 2014 quarter

The consumers price index (CPI) rose 0.3 percent in the September 2014 quarter. This follows rises of 0.3 percent each in the June 2014 and March 2014 quarters.

Housing and household utilities prices (up 1.0 percent) contributed about three-quarters of the rise, reflecting higher local authority rates (up 3.8 percent), rentals for housing (up 0.6 percent), and purchase of newly built houses excluding land (up 1.1 percent).

These rises were partly offset by lower prices for household contents and services (down 1.3 percent), which were influenced by lower prices for textiles, furniture, and whiteware. Communication prices also fell (down 1.4 percent), reflecting better-value telecommunication services (down 1.1 percent) and cheaper telecommunication equipment, mainly cellphone handsets (down 7.5 percent).

Transport prices showed a small rise (up 0.1 percent), with higher petrol prices (up 1.0 percent) and international airfares (up 1.4 percent) countered by cars (down 1.0 percent) and warrants of fitness. Fewer cars now require a six-month warrant of fitness, which we have shown as a price fall in the CPI.

Food prices remained flat in the quarter, compared with a 0.9 percent rise in the June 2014 quarter. Grocery food prices fell 1.5 percent, with bread down 5.9 percent (supermarkets discounted some of their own-brand bread to about $1.00). Vegetable prices rose 10 percent in the quarter, compared with 20 percent in the September 2013 quarter. The lower rise this quarter was influenced by a mild winter.

Eight groups rose in price this quarter, as shown in the graph below.

CPI shows 1.0 percent annual increase

The CPI increased 1.0 percent in the year to the September 2014 quarter, after increases of 1.6 percent and 1.5 percent in the years to the June 2014 and March 2014 quarters, respectively.

About four-fifths of the latest annual increase came from housing and household utilities (up 3.4 percent). Rentals for housing (up 2.2 percent) and purchase of newly built houses excluding land (up 4.8 percent) increased. Prices for electricity (up 3.7 percent), property maintenance (up 3.7 percent), and local authority rates (up 4.1 percent) also increased.

Alcoholic beverages and tobacco prices increased 2.7 percent. Cigarettes and tobacco increased 11.6 percent, influenced by a rise in excise duty in January this year.

Higher prices were also recorded for the following groups:

  • miscellaneous goods and services (up 1.6 percent)
  • health (up 1.9 percent)
  • education (up 3.5 percent)
  • clothing and footwear (up 0.4 percent).

Individually, other upward contributions came from:

  • milk, cheese, and eggs (up 5.9 percent)
  • international air fares (up 4.1 percent)
  • ready-to-eat food (up 2.3 percent)
  • medical services (up 2.7 percent).

By group, the main downward contributions came from:

  • communication (down 3.8 percent)
  • transport (0.5 percent)
  • recreation and culture (down 0.5 percent)
  • food (down 0.2 percent).

The main individual downward contributions came from lower prices for:

  • audio-visual and computing equipment (down 9.8 percent)
  • alcoholic beverages (down 2.0 percent)
  • petrol (down 1.8 percent)
  • vegetables (down 6.1 percent).

Housing-related prices up 1.0 percent

Prices for the housing and household utilities group rose 1.0 percent in the September 2014 quarter. This follows rises of 1.2 percent in the June quarter and 0.7 percent in the March quarter.

Local authority rates (up 3.8 percent) were the key contributor to the latest rise. This compares with a 3.8 percent rise in the September 2013 quarter. Local authorities set their rates annually, and these are mainly shown in the September quarter CPI. This quarter's movement in local authority rates reflects 92 percent of the weight in the sample, with the remainder expected in the December 2014 quarter CPI. Price movements on about 82 percent of the weight of the sample were included in the September 2013 quarter and 90 percent in the September 2012 quarter.

Other upward contributions came from:

  • rentals for housing (up 0.6 percent), with Auckland and Canterbury both up 0.7 percent
  • purchase of newly built houses (up 1.1 percent), with Canterbury up 1.3 percent and Auckland up 1.1 percent.

Of the newly built house prices reported by respondents in the September 2014 quarter and after adjusting for quality change, 45 percent showed no change in price, 52 percent showed increases, and 3 percent showed decreases.

Annual prices

For the year to the September 2014 quarter, prices for the housing and household utilities group increased 3.4 percent. All five of the subgroups showed upward movements.

The main upward contribution came from:

  • rentals for housing (up 2.2 percent), with Canterbury up 4.7 percent and Auckland up 2.2 percent 
  • purchase of newly built houses (up 4.8 percent), with Canterbury up 5.9 percent and Auckland up 5.7 percent 
  • local authority rates (up 4.1 percent).

Excluding Canterbury, newly built house prices rose 4.6 percent.

Summary of other group movements in the CPI

In the September 2014 quarter, the following groups rose:

  • recreation and culture (up 0.5 percent)
  • miscellaneous goods and services (up 0.7 percent)
  • alcoholic beverages and tobacco (up 0.5 percent)
  • health (up 0.9 percent)
  • transport (up 0.1 percent)
  • clothing and footwear (up 0.2 percent)
  • education (up 0.1 percent).

Combined, these groups contributed 2.25 index points to the overall CPI increase of 3.87 index points.

In the September 2014 quarter, the following groups fell:

  • household contents and services (down 1.3 percent)
  • communication (down 1.4 percent).

Combined, these groups contributed -1.29 index points to the overall increase of 3.87 index points.

CPI analytical series

In the September 2014 quarter, the tradable component of the CPI rose 0.1 percent and the non-tradable component rose 0.5 percent.

Higher prices for vegetables, petrol, package holidays, and books were the main upward contributors to the tradable component. Lower prices for grocery food and purchase of new vehicles were the main downward contributors.

Local authority rates, rentals for housing, purchase of newly built houses, and cigarettes and tobacco influenced the rise in the non-tradable component. This was partly countered by falls in bread and cereals, and telecommunications services.

Annual

For the year to the September 2014 quarter, the tradable component decreased 1.0 percent, influenced by lower prices for audio visual and computing equipment, vegetables, and petrol. The main upward contributions came from higher prices for dairy products and international air fares. 

Prices for the non-tradable component increased 2.5 percent, reflecting price rises for cigarettes and tobacco, rentals for housing, purchase of newly built housing, and electricity. The main downward contributions came from lower prices for telecommunication services and grocery food. 

In the September 2014 quarter, the trimmed mean measures – which exclude extreme price rises and falls – had quarterly rises of 0.3 percent and 0.4 percent. This indicates the ‘underlying’ price change (ie excluding extreme price rises and falls) was in line with the all groups CPI.

When the CPI basket is reweighted, as happened with this release, the annual trimmed mean measures can be calculated using the previous weights (June 2011 quarter weights) or the latest weights (June 2014 quarter weights).

For the September 2014 quarter, the annual trimmed mean measures based on June 2011 quarter weights are more comparable with the annual CPI all groups movement. These annual trimmed means increased between 1.2 percent and 1.5 percent. This is above the annual increase in the all groups CPI.

The annual trimmed mean measures based on September 2014 quarter weights increased between 0.9 percent and 1.3 percent.

Impact of items that rose and fell in price

Compared with the June 2014 quarter, the impact of the items that both rose and fell in price in the September 2014 quarter is slightly smaller. This led to a 0.3 percent rise in the September 2014 quarter CPI, following a 0.3 percent rise in the June 2014 quarter. The graph below shows the impact of the items that rose and fell in price.

Graph, Index points contribution to consumers price index, September 2011 to September 2014 quarter.

Further information is included in table 13 of this release.

CPI review implemented

Changes from our latest CPI review have been implemented in this release. The review reselected the basket of goods and services, and updated their relative importance. The CPI is reviewed every three years to ensure it maintains its relevance.

Consumers price index review 2014 provides details of the review.

Fifteen items were added to the basket, including cider, property valuation services, and packaged leaf salad. Twelve items were removed from the basket including men’s tracksuit pants, video cameras, and car stereos.

The updated weights show that $24.23 of every $100 that households spent on goods and services covered by the CPI is on housing and household utilities, compared with $23.55 in 2011. This reflects increased spending on housing rentals, property rates and related services, and household energy.

The 2012/13 Household Economic Survey (HES) was the main source of information for the new weights. However, because the HES does not provide accurate information for some goods and services, we also used information from a range of other sources.

The updated weights are included in table 9 of this information release.

We also changed the way we weight regional price change to better align with international best practice – by weighting it using expenditure in five broad regions. This means that price change in regions with higher levels of expenditure per person (eg Auckland, which has a regional expenditure share of 34.87 percent and makes up 33.37 percent of the population) will have a bigger impact on the headline CPI. This change was recommended by the 2013 CPI Advisory Committee. Before this change, regional price change was weighted using each region’s share of the population.

We also reduced the number of regional centres that CPI prices are collected from – down from 15 to 12. This was to re-invest the cost of collection towards funding CPI-related initiatives such as household living-costs price indexes for particular groups in society and seasonally adjusted analytical CPI series, as recommended by the 2013 CPI Advisory Committee.

The regional expenditure weights are included in table 7 of this information release.

Reweighted CPI food group

The food group of the CPI showed no change from the June 2014 quarter to the September 2014 quarter. This compares with a 0.4 percent increase obtained by averaging the food price index (FPI) across the three months within each of the June and September 2014 quarters. This difference of 0.4 of a percentage point compares with smaller differences when CPI basket and weight reviews were implemented in 2011 and 2008.

A number of factors contribute to these differences. They relate to the timing of the introduction of basket and weight changes.

The reweighted CPI food group provides the best estimate of change in food prices from the June 2014 quarter to the September 2014 quarter. This is because the reweighted CPI food group gives more new information on spending patterns than the FPI during this transitional quarter from the 2011 basket and weights to the 2014 basket and weights.

See the data quality section for further details.

New CPI tradables and non-tradables visualisation tool

We have a new interactive CPI tradables and non-tradables visualisation tool. The tool will help you explore the changes in the prices and relative importance of the goods and services in the CPI basket, broken down by tradables and non-tradables. This new tool is in addition to our existing CPI visualisation.

CPI tradables and non-tradables breakdown also available on Infoshare

Access the new CPI tradables and non-tradables time series on Infoshare by selecting the following from the homepage:

Subject category: Economic indicators
Group: Consumers Price Index 

        CPI Level 1 Groups Tradables and Non-tradables
        CPI Level 2 Subgroups Tradables and Non-tradables
        CPI Level 3 Classes Tradables and Non-tradables

Series reference naming pattern
Series name Base series reference TT for tradables, TN for non-tradables NZHEC classification
Eg Tradable food group CPIQ.SE9  TT  01
Eg Non-tradable food group CPIQ.SE9  TN  01
NZHEC = New Zealand Household Expenditure Classification

The series reference for the all groups will stay the same:

  • Tradables all groups: CPIQ.SE9NS6000
  • Non-tradables all groups: CPIQ.SE9NS6500

Big data for consumer electronics price movements

From the September 2014 quarter, we are using retail transaction data (or 'scanner data'), supplied by market research company GfK, to estimate the price movements of 12 consumer electronics categories in the CPI. The categories we are tracking this way are:

  • heat pumps
  • desktop computers
  • laptop computers
  • tablet computers
  • multi-function devices
  • cellphone handsets
  • digital cameras
  • digital camera memory cards
  • television sets
  • set-top boxes for television sets
  • DVD, Blu-ray players and player/recorders
  • home theatre and stereo systems.

Rather than collecting prices for a sample of consumer electronic products at about 60 outlets in the middle of each quarter, scanner data lets us track the prices and quantities of all products sold during a period of time. The data being supplied includes hundreds of thousands of transactions each month.

We have collaborated with Statistics Netherlands on a method to measure price change with this type of data. Our joint paper Scanner data and the treatment of quality change in nonrevisable price indexes on the method was recently published in the Journal of Business & Economic Statistics. This method incorporates the price-determining features of products in statistical models to ensure their changing quality is removed from the measurement of price change.

We will soon publish more details on the methodology, and its practical application in the CPI, in a 'sources and methods' document. This paper will also be included in the next issue of Price Index News.

New Zealand is the first country in the world to make such comprehensive use of scanner data for measuring price change for consumer electronics items in a CPI.

For more detailed data on the CPI see the Excel tables in the ‘Downloads’ box.

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