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Price Index News: January 2008

1. Short stories

Annual leave entitlements and the labour cost index

From 1 April 2007, annual leave entitlements increased from a minimum of three weeks per year to four weeks per year. The changing cost of providing annual leave is one of six non-wage labour costs measured by the labour cost index (all labour costs). Annual leave entitlements and the labour cost index looks at the impact of this increase on the June 2007 quarter labour cost index (all labour costs).

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2. Working with others

Economic measurement group workshop

The Centre for Applied Economic Research at the University of New South Wales (UNSW) hosted the seventh annual international Economic Measurement Group workshop in December 2007. The three themes were price measurement, productivity measurement, and research and development capitalisation. Statistics NZ presented papers at the productivity and price measurement sessions. The price measurement paper, which outlined the impact of various weighting and price updating options in the consumers price index, was also presented at the Ottawa Group conference in October 2007: New Zealand 2006 CPI Review: Price Updating

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3. Virtual papers

New Zealand Association of Economists conference 2007

In the July 2007 issue of Price Index News, we mentioned that Statistics NZ presented three price-index-related papers at the New Zealand Association of Economists conference in June 2007. These papers are now available on Statistics NZ's website.

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4. Nuts and bolts

International practices for business price index data processing and validation

Statistics New Zealand is progressively redeveloping a suite of business price indexes (BPIs) comprising the producers price index (PPI), the farm expenses price index (FEPI) and the capital goods price index (CGPI). As part of the redevelopment, New Zealand practice for various aspects of BPI compilation has been compared with the practices of five other Organisation for Economic Co-operation and Development (OECD) countries. International practices for business price index data processing and validation looks at how BPI data is processed and validated in New Zealand and in the five other countries. International comparisons of other aspects of BPI compilation will be included in subsequent issues of Price Index News.

Home ownership in the CPI

The purchase of new housing had an expenditure weight of 4.66 percent of the consumers price index (CPI) at the June 2006 quarter. The conceptual approach to measuring home ownership costs in the CPI and methods used to compile the purchase of new housing index are explained in Home ownership 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. The FPI is calculated by tracking changes in the prices of a basket of 154 representative food goods and services. Statistics NZ routinely publishes FPI indexes for five subgroups, 14 classes and five sections within the meat and poultry class. Weighted average retail prices are also published for 44 selected food goods and services.

The spreadsheet Food price index basket (within class) provides information about the types of food goods and services within each of the 14 FPI classes.

The FPI basket makes up the food group of the consumers price index (CPI). The next issue of Price Index News will contain similar information about the types of goods and services within each of the CPI classes.

Purchasing power parities

Gross domestic product (GDP) is used to assess a country's economic size and the wellbeing of its residents. Two common ways of comparing GDP across countries are to convert GDP figures to a common basis by using either exchange rates or purchasing power parities (PPPs). New Zealand's involvement in the Purchasing Power Parity Programme looks at New Zealand's contribution to the OECD-Eurostat PPP Programme and explains how PPPs are compiled and used.

Telecommunication equipment and services in the consumers price index

The range and quality of telecommunication services and equipment have evolved rapidly, as have the types and levels of consumption by households. Price change is often associated with changes in the levels, quality or range of services consumed, making this part of the consumers price index (CPI) basket difficult to measure. Telecommunication equipment and services in the consumers price index explains how this aspect is currently compiled.

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5. On the horizon

Excise duty on cigarettes and tobacco

The excise duty on cigarettes and tobacco increased by 1.887 percent on 1 December 2007. Because prices are collected monthly, approximately one-third of the impact on retail prices will be shown in the December 2007 quarter CPI and two-thirds will be shown in the March 2008 quarter.

Domestic air travel

The initial impact of a recent new entrant, offering passenger air transport services on the main trunk routes between Auckland, Wellington and Christchurch, will be fully reflected in the CPI for the December 2007 quarter. Of the domestic routes tracked for the CPI, flights between the three main centres carry between 50 and 60 percent of the expenditure weight of the domestic air transport index.

Summer seasonal goods

Some goods in the CPI basket are purchased predominantly during summer. The CPI summer seasonal survey of these goods is conducted once a year, in the December quarter. Summer seasonal goods in the basket include summer clothing, footwear and sports equipment. These goods are priced only in December quarters because they have a limited supply and demand in other quarters. Changes in summer seasonal prices are shown fully in December quarters and show no change in other quarters. For some outdoor living equipment goods, such as barbeques, prices are collected not only in December quarters but also in March quarters.

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6. Development updates

Labour cost index review

Statistics New Zealand is undertaking a labour cost index (LCI) review project. The LCI measures changes in wage rates and non-wage labour costs.

The reweight will help to ensure that 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 New Zealand'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 by 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) 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, Statistics NZ plans 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 are structured differently to the existing classifications used in the LCI, and the LCI sample will be updated 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 release. First QES results using the new industry classifications will be released at about the same time.

Statistics NZ met with a number of users of wage statistics to brief them on the LCI review and to seek their views.

The LCI reweight project will include initial research into the feasibility of including irregular wage and salary bonus payments in the LCI. A recommendation to include bonuses in the LCI was made by Adolf Stroombergen of Infometrics in his official statistics research paper on improving wage statistics. As part of this research, Statistics New Zealand will be talking to users about their requirements for bonus-payment information.

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 mentioned earlier, Statistics New Zealand is progressively redeveloping a suite of business price indexes comprising 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 underway on the following industries: agriculture (including FEPI); heavy and civil construction, and construction trade services (within construction); petroleum, coal and basic chemical manufacturing; rubber, plastics and other chemicals; other manufacturing; finance and insurance; computer services (within business services); real estate, and other property services; accounting and legal services; water transport, and other transport and storage services; retail trade; and wholesale trade. Current redevelopment provides further information about the project and progress to date.

Upcoming 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 will focus on reselecting and reweighting the basket of representative goods and services, using information from the 2006/07 household economic survey (HES) and other sources. Results from the 2007 HES were published on 30 November 2007.

The New Zealand household expenditure classification for the CPI was used for the first time in the HES for the 2006/07 survey. This will simplify the process of mapping HES expenditure to the CPI basket of representative goods and services.

The 2006 CPI review resulted in some significant relative changes in expenditure weights, which caused disruption to the annual trimmed mean and weighted percentile measures during the transition across the June 2006 quarter reweight.

Statistics New Zealand made two sets of annual trimmed mean and weighted percentile measures available during the transition across the June 2006 quarter reweight – one based on June 2002 quarter weights and one based on June 2006 quarter weights. Statistics NZ is investigating whether it is feasible to adopt an alternative methodology that would avoid disruption of the type that occurred in 2006. The alternative being considered is to compile the quarterly trimmed mean and weighted percentile measures using seasonally adjusted basket movements, and then deriving the annual trims directly from the quarterly trims.

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

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

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7. Making contact

Seeking feedback

The January 2008 issue of Price Index News (PIN) is the fourth issue of the newsletter. We welcome your feedback on the newsletter and will use your comments to help improve future issues.

Please take the time to answer the following questions and give us other comments you may have.

1. Approximately how much of each issue do you read?
2. Which sections of the PIN (short stories, working with others, virtual papers, nuts and bolts, on the horizon, development updates, making contact, and release dates), do you find most useful or interesting?
3. Which sections of the PIN do you find least useful or least interesting?
4. What articles have you found most useful or most interesting?
5. What articles have you found least useful or least interesting?
6. Have any of the PIN articles helped you in your work?
6a. If your answer is yes to 6, please describe how they have helped you?
7. Through reading PIN, has your knowledge of the price indexes published by Statistics NZ: not increased, increased, or increased greatly?
8. What type of articles would you like to read more of in future issues?
9. What type of articles would you like to read less of in future issues?
10. Do you find it convenient to be notified of the PIN via Expert Data Users News, or would you like an alternative way of receiving the PIN?
10a. If you would like an alternative, please indicate how you would like to receive the PIN.
11. Do you have other comments about the PIN?

 

Please forward any comments to Nicola Argyle (Statistical Analyst – Business, Labour and Overseas Trade Price Index outputs)
Phone: 04 931 4600 (Wellington) or 0508 525 525 (Information Centre, toll free within New Zealand).
Email: info@stats.govt.nz

If you would like to discuss any aspect of price index statistics, we would like to hear from you. Contact names appear at the end of the commentary of each price index Hot Off The Press information release. In addition, you are welcome to contact:

John Morris (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)
Chris Pike (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

January 2008

Thurs 17 M Consumers Price Index: December 2007 quarter
Food Price Index: December 2007

February 2008

Tues 5 M Labour Cost Index (Salary and Wage Rates): December 2007 quarter
Wed 13 M Producers Price Index: December 2007 quarter
Capital Goods Price Index: December 2007 quarter
Thurs 14 Food Price Index: January 2008

March 2008

Tue 11 M Overseas Trade Index (Prices): December 2007 quarter (provisional)
Overseas Trade Index (Volumes): December 2007 quarter (provisional)
Wed 12 Food Price Index: February 2008
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