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Price Index News: July 2008

1. Short stories

The rising cost of food

As many shoppers have noticed, dairy prices have been rising sharply. Butter, cheese and milk cost more today than they did a year ago. However, prices for dairy products have tended to be cyclical over the longer-term and data from the past decade shows us that high prices have been a temporary phenomenon. With prices breaking new records this time however, there is renewed interest in dairy. This article takes a look at price movements in New Zealand and abroad.

The rising cost of food in New Zealand compares New Zealand food and dairy price rises with those in Australia, the UK and the US. It examines some of the drivers behind dairy price inflation and the global factors that affect supply and demand. Finally, the article concludes with a brief look at the latest data to check for signs of an easing in dairy prices.

Grapes, hops and alcopops

Wine and alcopops have grown more popular over the past 10 years, reversing a decline that was caused by falling beer consumption during the previous 10 years. Grapes, hops and alcopops looks at how New Zealanders' tastes in alcoholic beverages have changed and how the price of alcoholic drinks on licensed premises has increased more than the price of those sold at local liquor stores or supermarkets.

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2. Nuts and bolts

International practices for business price index publication of results

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 publication of results looks at how BPI results are published in New Zealand and in the five other countries. This is the final aspect of BPI compilation to be compared. Articles on other aspects such as sample selection, price collection and index calculation can be found in previous issues of Price Index News.

Measuring prices for the food price index and the food group of the consumers price index

Food in the consumers price index (CPI) had an expenditure weight of 17.38 percent at the June 2006 quarter. The food group is also published monthly as the food price index (FPI). The sources and methods used to compile food prices are explained in Food prices in the consumers price index and food price index.

A comparison between the adjusted and unadjusted labour cost index

The labour cost index (LCI) is designed to measure changes in pay rates for a fixed quantity and quality of labour input. An analytical unadjusted series is also compiled to sit alongside the LCI to further illustrate how wages are changing. Unlike the official LCI, the analytical unadjusted series does reflect quality changes within occupations. A comparison between the adjusted and unadjusted labour cost index looks at the two indexes in further detail and discusses recent results from the two series.

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3. Virtual papers

User guide for Statistics New Zealand's wage and income measures

Statistics New Zealand released a User Guide for Statistics New Zealand’s Wage and Income Measures on its website recently. The user guide consists of an interactive 'frequently asked questions' page, a flowchart to help people decide which wage or income measure to use, and a more detailed user guide that is available free as a PDF file.

Wage and income measures are among the more commonly used statistical outputs produced by Statistics New Zealand. However, their sheer number can cause confusion about which one is best to use. The user guide attempts to clarify which questions or situations each measure is best applied to as well as its design and purpose.

2005 results of the OECD/Eurostat Purchasing Power Parity Programme

Final results from the Organisation for Economic Co-operation and Development’s Purchasing Power Parity (PPP) Programme have become available for the 2005 round. In 2005, New Zealand was grouped with Cyprus, Greece, Israel, Italy, Slovenia and Spain. These countries had real gross domestic product per capita of between 75 percent and 99 percent of the OECD average. An overview of the 2005 results and a comparison with the 2002 and 1999 rounds is contained in 2005 results from the OECD-Eurostat Purchasing Power Parity programme.

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4. On the horizen

Increase in childcare subsidy

On 1 April 2008, there were increases to the hourly rates for the childcare subsidy administered by Work and Income. The increased subsidy rates will have a downward influence on the early childhood education index for the June 2008 quarter CPI.

Additional analytical consumers price index information

Consumers Price Index (CPI) Hot Off The Press tables 8.01 (quarterly) and 8.02 (annual) provide the following supplementary analytical information at the all groups, group, subgroup and class levels:

  • expenditure weight
  • percentage change
  • index points effect.

Index points effect measure the contribution of each group, subgroup and class to the overall quarterly and annual change in index points in the all groups CPI. From the June 2008 quarter onwards, two further columns will be added to these tables. The additional columns will present information on:

  • percentage points contribution
  • percentage contribution.

Percentage points contribution measures the contribution of each group, subgroup and class to the overall quarterly and annual percentage change in the all groups CPI. For any particular level of the CPI classification, such as the group level, percentage points contribution add to the overall percentage change in the all groups CPI. This information is calculated on unrounded index numbers and will be presented to three decimal places.

Percentage contribution measures the relative contribution of each group, subgroup and class to the overall quarterly and annual index points (or percentage) change in the all groups CPI. For any particular level of the CPI classification, such as the group level, percentage contributions add to 100 percent. This information is calculated on unrounded index numbers and will be presented to one decimal place.

The analytical information on percentage points contributions and percentage contributions is being added to tables 8.01 and 8.02 to assist users who prefer to work with contribution information expressed in percentage points, rather than index points. The additional information may also assist users to quickly determine what percentage movements in the CPI would have been, if the prices of particular components had remained unchanged.

As the analytical information on percentage points contributions and percentage contributions is being calculated from unrounded index numbers, the overall change in percentage points will at times differ from that calculated from published index numbers, which are rounded to the nearest index point. This sometimes occurs for the existing points effect information included in these tables. The points effect and percentage points contribution information are regarded as supplementary analytical information. The official change in the all groups CPI, in terms of both percentages and index points, are shown in or can be calculated from index numbers in table 1 of the CPI Hot Off The Press. The index numbers in table 1 are rounded to the nearest index point, from the June 2006 quarter onwards. Index numbers for earlier periods are given to five decimal places, to preserve percentage changes that were originally published on earlier expression bases.

The New Tables show the additional information on percentage points contributions and percentage contributions in tables 8.01 and 8.02 for the March 2008 quarter.

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5. Development updates

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 focuses on reselecting and reweighting the basket of representative goods and services, using information from the 2006/07 Household Economic Survey (HES) and other sources.

The basket of goods and services has been reviewed, as have the pricing specifications of the products being tracked to ensure they remain representative of household purchases. Price collection has commenced for basket additions.

The reweighted food price index will be published for the July 2008 month on 25 August. The reweighted CPI for the September 2008 quarter will be released on 21 October. An information paper about the review, including the new set of CPI weights and details of basket changes, will be released in early October 2008, two weeks before the September quarter CPI.

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

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

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 ensure 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 and 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) on 3 November 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, we plan 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 have a different structure from existing classifications used in the LCI. The LCI sample will be refreshed 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 wage and salary rates information release. First QES results using the new industry classification should be released at about the same time.

Recent work on the review has focused on reviewing the sectors of ownership and industries that survey respondents are classified to, and on analysing 2006 Census and associated information at the industry by sector of ownership level (to ensure fitness for use in reweighting the LCI).

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 stated previously, 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/civil construction and construction trade services
  • rubber, plastics and other chemical manufacturing
  • prefabricated building, furniture and other manufacturing
  • ownership of owner-occupied dwellings
  • rental, hiring and real estate services
  • accounting and legal services
  • water transport and other transport/storage services
  • wholesale trade
  • scientific research and technical services
  • health and community services
  • cultural and recreational services.

Current redevelopment provides further information about the project and progress to date.

Redevelopment is provisionally complete for petroleum, coal and basic chemical manufacturing; non-metallic mineral product manufacturing; and retail trade. The new indexes will be implemented in the PPI once they have been thoroughly tested.

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6. Making contact

In future issues of Price Index News, we will use this section to let you know about:

  • plans to consult users of price index statistics
  • the availability of consultation papers
  • how users of price index statistics can participate in the consultation process
  • decisions made after users have been consulted.

If you would like to discuss any aspect of price index statistics, we would like to hear from you. Contact names are at the end of the commentary of each Hot Off The Press information release. In addition, you can 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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7. Release dates

Price index release calendar for the next three months

M = Media conference

July 2008

Tue 15 M Consumers Price Index: June 2008 quarter
Food Price Index: June 2008

August 2008

Mon 4 M Labour Cost Index (Salary and Wage Rates): June 2008 quarter
Tue 19 M Producers Price Index: June 2008 quarter
M Capital Goods Price Index: June 2008 quarter
Mon 25 Food Price Index: July 2008

September 2008

Wed 10 M Overseas Trade Price Index (Prices): June 2008 quarter (provisional)
Overseas Trade Price Index (Volumes): June 2008 quarter (provisional)
Thu 11 Food Price Index: August 2008
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