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Price Index News: October 2014

1. Short stories

The New Zealand CPI in an international context

The New Zealand CPI in an international context looks at the key differences in the consumers price index (CPI) price change in New Zealand compared with that in selected countries.

Bees, blues, beds, and mangels: Quirky items from the CPI's 100 years

Bees, blues, beds, and mangels: Quirky items from the CPI's 100 years tells us about some rather interesting items in the CPI basket over the past 100 years.

Retail fish prices in the CPI, 2008–13

Retail fish prices in the CPI, 2008–13 gives an overview of the prices of fresh fish collected for the CPI.

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.

Tradables and non-tradable goods and services – what they are

Tradables are goods and services that are imported or are in competition with foreign goods and services, either in domestic or foreign markets. Non-tradables are goods and services that do not face foreign competition.

How to use the tool

Drill down from the ‘all groups’ CPI interactive pie chart to more than 100 basket subcategories broken down by tradables and non-tradables, including restaurant meals, electricity, petrol, and international air fares. The longer the slice, the larger the percentage increase. The wider the slice, the more important the subcategory is in the overall index.

When you open the CPI visualisation, you will see a brief description of how to use it. For further details, click on the visualisation's 'help' link or see Help using CPI visualisations.

You can also download the CPI tradables and non-tradables data in CSV format from the link at the top-right of the visualisation web page.

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

The CPI tradables and non-tradables visualisation will have the latest figures, for the September 2014 quarter, when the CPI is released on 23 October.

2. Working with others

The New Zealand CPI at 100: History and interpretation

To coincide with the 100th birthday of the consumers price index (CPI), Victoria University Press has published a book on the history of the CPI – The New Zealand CPI at 100: History and Interpretation edited by Sharleen Forbes and Antong Victorio.

Several chapters from the book were written by Statistics NZ employees:

  • Chris Pike – CPI frameworks, 1949–2014
  • Alan Bentley – Special consumer price indices for particular groups of households
  • Frances Krsinich – Quality adjustment in the New Zealand consumers price index.

Two chapters were based, in part, on previous Price Index News articles. These chapters were written by Sharleen Forbes: ‘The changing basket of goods’ and ‘One hundred years of prices: Food and transport’. Themes covered in other chapters include: methods, and how these evolved over time; uses, including monetary policy uses and tracking living costs; expenditure weights; and regional prices. The authors of these chapters include Brian Easton, Michael Reddell, John Gibson, Grant Scobie, and Gary Hawke.

Purchase The New Zealand CPI at 100: History and Interpretation.

3. Nuts and bolts

Big data for consumer electronics price movements

From the September 2014 quarter onwards, Statistics NZ will use retail transaction data (or 'scanner data'), supplied by market research company GfK, to estimate the price movements of 12 consumer electronics categories in the consumers price index (CPI). The categories we will track 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 products at selected 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.

We need new price index methods to deal with this kind of data, and we have been collaborating with Statistics Netherlands on a method called 'Imputation Tornqvist rolling year GEKS' (ITRYGEKS). 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 characteristics of products in statistical models to ensure their changing quality is removed from the measurement of price change.

We will release more details on the methodology, and its practical application in the CPI, in a 'sources and methods' document when we release the September quarter CPI. This will also be linked in the next issue of Price Index News.

New Zealand will be the first country in the world to make such comprehensive use of scanner data for the measurement of consumer electronics items in a CPI.

4. On the horizon

Local authority rates in the CPI

The CPI Local Authority Rates Survey is conducted each year in the September quarter, for a sample of territorial authorities and regional councils. We survey rates once a year because local authorities usually strike their rates yearly.

While normally any rate changes take effect from 1 July, not all territorial authorities and regional councils set rates during the September quarter. The small number of rates struck after the September quarter, combined with the timing of survey returns and processing, result in rate changes being shown in both the September and December quarter CPIs. For the past five years, between 80 and 90 percent of the weight in the sample of local authority rates has been included in the September quarter CPI.

See Property rates and related services in the CPI for more information on local authority rates.

Alcohol excise duty increase

The annual indexation adjustment of the excise duty on alcoholic drinks occurred on 1 July 2014. The adjustment was a 1.45 percent increase in the excise duty, based on the movement in the 'CPI less credit services' index from the March 2013 quarter to the March 2014 quarter.

The effect on retail prices should show fully in the CPI for the September 2014 quarter, depending on the timing of price increases in pubs, clubs, restaurants, and liquor stores, and the timing of price collection by Statistics NZ staff.

Increases within the CPI ‘other private transport services’

The CPI ‘other private transport services’ class contains such services as vehicle relicensing, driver licensing, warrants of fitness, road-user charges, parking services, and driving tuition.

Road-user charges for a private motor car, administered by the NZ Transport Agency, increased 9.4 percent (or $5.00 per 1,000km) on 1 July 2014. Transaction fees associated with the purchase of road user charges remained unchanged, and will moderate this increase. Excise duty on petrol also increased – by 3 cents a litre on 1 July 2014. The full impact of both these price increases will be shown in the September 2014 quarter CPI

There were changes to warrants of fitness (WoF) for cars in January and July 2014. Fewer cars now require a six-month WoF.

  • From January 2014, cars first registered from January 2004 were eligible for a 12-month WoF, while pre-2004 cars remained on six-month WoFs. Previously, cars under six years old required a 12-month WoF, and cars that were six years or older required a six-month WoF.
  • From July 2014, cars first registered from January 2000 are on 12-month WoFs. Cars first registered before then remain on six-month WoFs. Also, from July 2014, new or nearly new cars may be issued with WoFs that expire on the vehicle’s third anniversary of first registration. 

These WoF changes will be shown as a price fall in the CPI for the September 2014 quarter.

5. Development updates

Decision on CPI Advisory Committee recommendations

On August 25 2014 we published our decisions on the Consumers Price Index (CPI) Advisory Committee’s recommendations.

Details can be found in Decision on 2013 CPI Advisory Committee recommendations.

Two new initiatives for the CPI will occur as part of these decisions. These initiatives will help to ensure we continue to meet customer needs.

We will produce a suite of eight household living-costs price indexes (HLPIs) for four household groups by early 2016:

  • beneficiaries
  • income groups (quintiles)
  • Māori
  • superannuitants.

The HLPIs will provide greater insight into the inflation these household groups experience.

We will also produce seasonally adjusted analytical CPI series by the June 2015 quarter, to give better understanding of underlying inflation trends without the influence of seasonal price change.

The decisions are in response to recommendations made by an independent CPI Advisory Committee, chaired by Diana Crossan.

As recommended by the committee, these initiatives will be funded by reducing the number of regional centres that CPI prices are collected from – down from 15 to 12. We stopped collecting prices in Rotorua, Wanganui, and Timaru, on 1 July 2014. Price change for these regions will be directly represented by Tauranga, Palmerston North, and Christchurch, respectively.

For more information on the 2013 CPI Advisory Committee please contact:

Nick Martelli or Alan Bentley
Wellington 04 931 4600 or 0508 525 525
Email: info@stats.govt.nz

2014 CPI and FPI reviews now available

We recently undertook a review of the consumers price index (CPI) and the food price index (FPI). We review the CPI every three years to ensure that the basket of goods and services continues to reflect household spending patterns. The reviews resulted in changes to both the CPI and FPI.

Read Consumers price index review: 2014 and Food price index review: 2014 for more details.

Changes to the FPI were implemented in Food Price Index: July 2014. Changes to the CPI will be implemented in Consumers Price Index: September 2014 quarter on 23 October 2014.

The CPI is made up of a representative ‘basket’ of goods and services purchased by New Zealand households. As part of the review, we reselected this basket and updated the relative importance of these goods and services. Items that were added to the basket include frozen prawns, cider, spades, and property valuation services. Items removed from the basket include video cameras, car stereos, and indoor plants. See The times are changing and so is what we're buying media release for further details. The 2012/13 Household Economic Survey was our primary data source, which we supplemented with other sources.

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.

For more information on the CPI review please contact:

Nick Martelli or Alan Bentley
Wellington 04 931 4600 or 0508 525 525
Email: info@stats.govt.nz

Labour cost index review

The labour cost index (LCI) measures changes in wage rates and non-wage labour costs (for example, the costs for annual leave and superannuation). We are now reviewing the LCI weights. The review will help keep the LCI relevant – to ensure it reflects the current industry and occupation structures of the labour market.

Our recent work on the review has focused on calculating and analysing the new weights using the updated sample; 2013 Census data; and associated information from the Business Register of New Zealand businesses, the Labour Cost Survey, the Quarterly Employment Survey, and linked employer-employee data. The first releases of the reweighted indexes will be for the September 2014 (salary and wage rates) and the June 2015 (non-wage labour costs) quarters.

Price indexes quickly lose relevance if not reviewed, which would undermine the fit-for-purpose quality not only of the indexes, but also of the wider macroeconomic statistics system. The LCI is used as a deflator in calculating gross domestic product. It is also used by the business community in wage negotiations and contract indexation clauses. Government agencies such as the Reserve Bank and The Treasury use the LCI to monitor and forecast wage inflation.

The review is based on the existing industry and occupation groups – the New Zealand Standard Industrial Output Categories and the Australian and New Zealand Standard Classification of Occupations, respectively. As part of the review, we have refreshed the sample of jobs we track, adding about 270 positions and removing about 190, to reflect relative growth and decline in occupations and industries. There are over 6,000 positions in the sample.

For further information about the LCI review, please contact:

Ludeth Mariposa
Wellington 04 931 4600 or 0508 525 525
Email: info@stats.govt.nz

Annual update of producers price index weights

The producers price indexes (PPIs) are used as deflators in calculating gross domestic product (GDP), which is New Zealand’s official measure of economic growth. These deflators are used to remove the effect of price change so that change in the volume of goods and services produced in the economy can be measured.

The PPIs are also used as an inflation measure and in contract indexation; for example, to reflect changes in prices during the life of a commercial project so all parties have agreed procedures for adjusting originally contracted prices.

We update the PPI industry and commodity weights annually to help maintain the relevance of this index. The weights come from the supply and use tables (SUT) produced annually as part of the New Zealand System of National Accounts. These updates reflect changes in economy-wide income and expenditure, in particular the mix of products and the mix of industries. We re-weight the industries at the New Zealand Standard Industry Output Categories level 4 and above (there are 118 level 4 industries).

We introduced the latest weights in the March 2014 quarter PPI, based on 2010/11 SUT. These were first used to weight price movements from the December 2013 quarter to the March 2014 quarter.

We are also updating the lower-level commodity indexes and product samples. This work is part of reviewing the business price indexes.

Reviewing the business price indexes

We are continuing our rolling review of the business price indexes – the producers price index (PPI), the farm expenses price index (FEPI), and the capital goods price index (CGPI). The review has two objectives: to maintain the relevance of these indexes and to collect commodity data for use in the national accounts.

We are surveying a sample of economically significant enterprises operating in New Zealand, to collect information on their supply and use of goods and services (commodities). We use information from the commodity data collection to balance the production and expenditure estimates of gross domestic product (GDP), within an input-output framework. Doing this requires us to compile tables that detail the supply and use of commodities, by industry.

We also use this commodity information (by industry) to update lower-level weights for the business price indexes. These are used as deflators in producing a chain-volume measure of GDP.

We carried out the previous PPI redevelopment from 2004 to 2010. The current rolling review is the first to use the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06). As part of the review, we prioritised the ANZSIC06 industries and are reviewing them on eight-year cycles for most industries, and on four or 12-year cycles for those remaining.

Currently, we are reviewing these industries:

  • agriculture
  • fishing 
  • meat and meat product manufacturing
  • seafood processing
  • dairy product manufacturing
  • fruit, oil, cereal, and other food product manufacturing
  • beverage product manufacturing
  • telecommunication services
  • Internet service providers and data processing services
  • computer system design and related services

We have completed reviews and also implemented lower-level PPI commodity weights and updated product samples for the following industries:

Implemented in the March 2013 quarter:

  • printing and publishing

Implemented in the June 2013 quarter:

  • primary metal and metal product manufacturing
  • fabricated metal product manufacturing
  • electricity, gas, and water

Implemented in the March 2014 quarter:

  • farm expenses price index

Implemented in the June 2014 quarter:

  • forestry and logging
  • aquaculture
  • hunting and trapping
  • agriculture, forestry, and fishing support services
  • tobacco product manufacturing
  • petroleum and coal product manufacturing
  • basic chemical and basic polymer manufacturing
  • fertiliser and pesticide manufacturing
  • pharmaceutical, cleaning, and other chemical manufacturing
  • transport equipment manufacturing
  • electronic and electrical equipment manufacturing
  • machinery manufacturing
  • rail, water, air, scenic and sightseeing transport.

We will be implementing lower-level PPI commodity weights and updated product samples for agriculture in the September 2014 quarter.

All other industries to have lower-level PPI commodity weights and updated product samples will be after the September 2014 quarter. We will publish an updated list of these industries in Price Index News.

For more information about the rolling business price index review, please contact:

James Griffin
Wellington 04 931 4600 or 0508 525 525
Email: info@stats.govt.nz

Producers price index review of scope and purpose

An essential element of Statistics NZ’s goal of delivering accessible, relevant, and timely statistics for all New Zealanders, is to ensure the statistics we produce serve the needs of our customers. We are conducting a formal review of the scope and purpose of the producers price index (PPI). The review includes external consultation with customers to ensure their needs are well understood and met.

The PPI is a key economic indicator in most countries, including New Zealand. PPIs are constructed as either output indexes, measuring change in the prices that producers receive for their outputs; or input indexes, measuring change in the prices that producers pay for their inputs, excluding labour and capital.

The PPIs we produce are used as deflators in calculating gross domestic product (GDP). These deflators are used to remove the effect of price change so we can measure change in the volume of goods and services produced in the economy. The PPIs are also used as an inflation measure and in contract indexation; for example to reflect changes in prices during the life of a commercial project.

We have produced our PPIs in similar form for the past 30 years. Over this time the indexes have been re-weighted and re-referenced several times. However, the underlying conceptual basis and coverage have remained largely unchanged.

In our review of scope and purpose of the PPI we consulted PPI customers and are now considering the feedback we received.

Key issues covered in the review include:

  • principal purpose of the PPI
  • weighting and pricing basis used
  • transactions that are in the PPI’s scope
  • industry and commodity detail and frequency
  • index formula
  • dissemination options.

We will have an update in the September 2014 quarter PPI release on 20 November about the outcomes of the consultation, and any changes we will be making to the PPI.

For more information about the producers price index review of scope and purpose, please contact:

James Griffin
Wellington 04 931 4600 or 0508 525 525
Email: info@stats.govt.nz

6. Release dates

Price index release calendar for the next three months

October 2014

Tue    21 Oct        Labour Cost Index (All Labour Costs): June 2014 quarter
Thu    23 Oct  M   Consumers Price Index: September 2014 quarter

November 2014

Wed   5 Nov   M   Labour Cost Index (Salary and Wage Rates): September 2014 quarter
Thu   13 Nov        Food Price Index: October 2014
Thu   20 Nov   M  Producers Price Index: September 2014 quarter
Thu   20 Nov   M  Capital Goods Price Index: September 2014 quarter
Thu   20 Nov        Farm Expenses Price Index: September 2014 quarter – tables

December 2014

Mon    1 Dec   M  Overseas Trade Indexes (Prices): September 2014 quarter (provisional)
Mon    1 Dec   M  Overseas Trade Indexes (Volumes): September 2014 quarter (provisional)
Thu   11 Dec        Food Price Index: November 2014

M= Media conference

This issue of Price Index News was released on Wednesday 15 October 2014.

ISSN 2350-3092

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