CONSUMER PRICE INDEX: METHODOLOGICAL GUIDELINES ST KITTS & NEVIS

Transcription

1 CONSUMER PRICE INDEX: METHODOLOGICAL GUIDELINES ST KITTS & NEVIS SECTION I: GENERAL INFORMATION Country: St Kitts & Nevis Agency & Address: Statistical Office, Church St, Basseterre Tel/Fax/ ; ; Contact Person: Mr. Carlton Phipps, Statistician Name (s) of series computed: Index of Retail Prices Frequency of dissemination: Monthly on request: Quarterly in the ECCB s Economic & Financial Report Annually in St Kitts /Nevis Annual Digest and ECCB s Annual Statistics Digest. Mode of dissemination: Hard Copy Timeliness of data: Monthly data- one week after the end of reference period Annual data- six to nine months after the reference period 1

2 SECTION 11: INTERNATIONAL STANDARD GUIDELINES Definition The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers for a constant market basket of consumer goods and services. These goods and services were selected in some previous reference period. The importance(weight) of each item is determined by the amount spent on them by households. Framework and Classification The Index is classified according to the following major groups and subgroup: FOOD & NON-ALCOHOLIC BEVERAGES- cereals and bakery products, Meat, poultry and fish, Dairy products and eggs, Fats and Oils, Fruits and Vegetables, Non alcoholic beverages, Other foods ALCOHOLIC DRINKS & BEVERAGES- local and imported rum, beer and brandy ACCOMMODATIONS- house rent, insurance, mortgage and building materials CLOTHING & FOOTWEAR- men s clothing, women s clothing, boy s and girl s clothing, men and boy s footwear, women and girl s footwear, infant dresses, clothing material, tailoring/dressmaking, infant shoes, clothing accessories FUEL & LIGHT - Electricity, Progas and Kerosene TRANSPORTATION- Motor vehicles, gasoline, ferry fare, airfare, car insurance, bus fare, automobile parts and repairs HOUSEHOLD FURNISHINGS, SUPPLIES and OPERATIONS- furniture, electrical appliances, soft furnishings, cable rental, cleaning supplies MEDICAL CARE & EXPENSES- doctors fees, hospital care, health insurance, medication EDUCATION- tuition fees, uniforms, computers and accessories, stationary PERSONAL SERVICES- Hair cut and hair dresser, Gym, Driving lessons, Manicure, Passport Pictures MISCELLANEOUS ITEMS personal supplies, Cinema, lottery tickets, newspaper 1. Scope and coverage The index covers both St Kitts and Nevis. 2

3 SECTION 11: SOURCE AND METHOD OF COMPILATION 1. Source Data on expenditure collected from families and individuals during the Household Income and Expenditure survey (HIES), provided the basis for the 2001 CPI basket. The 1998 HIES was based on a random sample of 1200 households or approximately ten percent of the households from the 1991 Population and Housing Census. The sample was comprised of 900 households in St.Kitts and 300 households in Nevis. The survey was scheduled to run for the entire year, but a catastrophic hurricane in September, prevented this. The survey was stopped to avoid the introduction of biases into the expenditure data. A total of 962 households were interviewed and asked to maintain a diary of all expenditure for a period of two weeks. For the development of the CPI basket, all households from which data was collected, except those with zero income was utilized. This resulted in expenditure data from 894 households being used in the development of the weights of the categories of the CPI basket. 2. Base Year The base period is January Selection of the basket A wide variety of goods and services were included in the basket in order to reflect the types of items purchased and utilized by the majority of consumers within the Federation. Items chosen were in popular demand, but at the same time care had to be taken that they were not fads or functions of temporary or irrational demand. The items are classified into sections and then into groups or categories. The Consumer Price Index is divided into eleven (11) categories and covers approximately three hundred and twenty nine (329) items. 4. Data Collection Each month officers from the Statistics Division of the Planning Unit visit or call retail stores, service establishments and doctors offices in Basseterre and Sandy Point in St.Kitts, to collect price information on the items used to track and measure price change in the CPI. No prices are presently being collected in Nevis. During each visit, the 3

4 officers collect prices on specific goods and services that were precisely defined in the basket. If an item is available, the officers record its price. If the selected item is no longer available or if there has been a change in the quality or quantity of the good or service since the last time prices were collected, the officer substitutes a similar item or records the quality change in the item. In total, over 1500 individual price quotations are collected and reviewed on a monthly basis. Once the prices have been collected they are checked for accuracy and consistency and the necessary corrections or adjustments are made. Data Collection process The process begins with the collection sheets which are taken to retail outlets and personal service providers by the statistical officer on the second Tuesday of each month.. Prices from one outlet are written on each sheet. Note that the items are clearly specified. The date and name of collection outlet is written at the top of the page. The following table shows a section of an actual price collection sheet Price Collection Sheet Outlet : ITEMS UNIT SIZE BRAND/DESCRIPTION PRICE _ Rice (counter: Loose) 2 lbs Rice (Packaged) 2 lbs Uncle Ben Flour (counter: loose) 2 lbs Flour (Packaged) 2 lbs Purity Cornmeal (loose) 1 lb Macaroni 200 grams Nova Crackers (small) 1 pkt Crix Sweet biscuits 1 pkt 150g Butterkist Cornflakes 1 box 12.3oz Kellogs Oats 1 pkt 450gr Quaker Cream of Wheat 1 pkt 400g Quick Other Breakfast cereals: Raisin Bran 1 box 15oz Post Cheerios (Honey Nut) 1 box 14oz Nestle Lucky Charms 1 box 14oz Nestle Prepared Cereal Mixes Cake Mix 1 box 517g Betty Crocker 4

5 Column (a) above is labeled Items. This column shows the various items\services that are collected at each outlet. Columns (b) and (c) are labeled Unit and Size respectively. These two columns offer a specific detailed description of the size and quantity of item that is to be recorded. Column (d) labeled Brand\Description, tells the officer which brand of item is to be collected. This column as well as Columns (b) and (c) are vital to the officer as they serve to ensure that the same item is collected each time. In column (e) labeled Price the officers record the prices for the various items and services. Here also they note whether or nor an item is available at that particular time. The prices from the collection sheets are then entered into Worksheet 1 (following) in section (d Current price) in the column corresponding to the outlet from which they were collected.. 5. The meaning of Weights The amount spent on each item of the CPI basket is compared to the total household spending to obtain the relative importance or weight of the commodities in the basket. The eleven (11) major sections in the CPI each have representative group weights. The following table shows the number of items in each section of the basket and the section s assigned weight. Section No. of Items Weight Food Alcohol & Tobacco Housing Clothing & Footwear Household Furnishings & Supplies Medical Care & Expenses Transport & Communications Fuel & Light Education Personal Services Miscellaneous Items Total The weight associated with each section is calculated by taking the ratio of the expenditure in each section to total expenditure and multiplying by 100. These weights establish the impact that a particular price change within each section will have on the overall index. For example, a five (5) % rise in the cost of petrol will have a 5

6 greater impact on the household budget than a 5% increase in the price of a newspaper. This is due to the fact that households spend more money on petrol (hence a higher weight) than they do on newspapers. 6. Calculation of Relatives After the review of an item or service, its average price or current price is calculated. Since prices for the same item is collected from as many as 5 outlets, the individual prices are summed and divided by the number of collection places. Average prices are calculated for all items in the basket. The price relative is then computed by taking a ratio of the current month s average price and the base month s average price for the item. Calculating a weighted price relative : Since the CPI is calculated using fixed based year weights, the weight of the item in the base period is required. The weighted price relative can then be calculated by multiplying the price relative by the base weight of the item. This process is repeated for each item. 7. Deriving an index for a section / subgroup The index is then calculated for the subgroup, by dividing the total weighted price relative by the total weights of the subgroups then multiplying the result by Deriving the All Items Index The Laspeyres base weighted formula is used to derive the All Items Index. Once index numbers are derived for each group of the index, the numbers are then grouped together to obtain an aggregate index for each of the sections. They are in turn weighted to give an average price movement representing all goods and services in the basket. This movement or average change is identified as the All Items Index. This All items figure is the single most vital figure as it shows the overall rate of change in prices. To better demonstrate the steps outlined above, a practical example is given using the collection sheets and worksheets used in the present process. The information collected is entered into the computer using Microsoft Excel. The worksheets are linked to reduce human error and to increase efficiency and timeliness in publication.. PRACTICAL EXAMPLE ON THE CALCULATION OF THE CPI The prices from the collection sheets are entered into Worksheet 1 in section (d Current price) in the column corresponding to the outlet from which they were collected.. Formulae are embedded in column (e) so that from this point, the work is done automatically. 6

7 Worksheet (1) (a) (b) (c) (d) (e) ITEM SOURCE CODE CURRENT PRICES AVERAGE PRICE 1.FOOD (I) Cereals and Bakery products Rice(loose) A.C.D.E Rice(packaged) A.B.C.D.E Flour(loose) A.C.D.E Flour(packaged) A.B.C.D.E Cornmeal(loose) A.C.D.E Macaroni A.B.C.D.E Crackers A.B.C.D.E Sweet Biscuits A.B.C.D.E White bread Fl.Fa.Fb Whole wheat bread Fl.Fa.Fb Buns Fl.Fa.Fb Cakes Fl.Fa.Fb Raisin roll Fl.Fa.Fb Corn flakes A.B.C.D.E Oats A.B.C.D.E Cream of wheat A.B.C.D.E Raisin bran A.B.D.E Cheerios A.B.C.D.E Lucky charms A.B.C.D.E Cake mix A.B.C.D.E The table above shows part of an actual worksheet table 7

8 Column (a) above is labeled Items. This column shows the various items\services that are collected in the CPI. Here similar items are sorted into the various groups and sections mentioned earlier. Column (b) is the Source column and in this column is a list of the various stores and outlets from which the items are collected. For example, A. represents Rams Supermarket while B. represents Horsfords Valu-Mart, and so forth. In column (c), each item is allocated a code or an identity. This code serves to identify the particular section or group of the item. For example Cheerios, Lucky Charms and Raisin Brand are all secondary cereals therefore they retain a similar identity. Column (d) is labeled current price and just as the name indicates it serves to capture the prices of each item in each outlet. The numbers 1 through 5 represents the various outlets referred to in column (b) Column (e) labeled Average Price serves to calculate an average price by taking the sum of the prices for each item then dividing this total by the number of outlets or stores. 8

9 Worksheet Two (2) d/c e*b (a) (b) (c) (d) (e) (f) BASE WEIGHTED ITEM WEIGHT PRICE AVERAGE PRICE PRICE JAN 2001 PRICE RELATIVE RELATIVE 1.FOOD Rice(loose) Rice Packaged Flour(loose) Flour(packaged) Cornmeal(loose) Macaroni Crackers Sweet Biscuits White bread Whole wheat bread Buns Cakes Raisin roll Corn flakes Oats Cream of wheat Raisin bran Cheerios Lucky charms Cake mix (a) All Cereals And Bakery Products The table above shows a section of an actual worksheet table 9

10 Column (a) labeled Items represents the items as they were grouped together in worksheet one (1). However, whereas in worksheet two (2) all items within the basket were listed, in this work sheet, similar items with negligible assigned weights collectively listed under one heading. For example in the section Education, pens pencils and books are listed collectively as stationary supplies. Column (b) shows the weight or importance attached to each item. Each weight is a proportion of a total weight of Therefore, a weight of 2.48 given to macaroni means that out of 1000, a portion of 2.48 is assigned to the purchasing of macaroni on a monthly basis. Column (c) shows the base price of each item or service. These prices are fixed and represent that period in time to which all price comparisons are being made. The fact that this base period never changes makes this index a Laspyeres Index. Such indices operate on the principle that there is a fixed base period and as a result neither the base price nor the weight of the item changes. Column (d) shows the current average price of each item or service and these figures are linked by worksheet one and are the figures located in the average price column of that worksheet. These figures are automatically adjusted when any changes are made to the current price columns of worksheet one (1). Column (e) calculates the price relative of each item. A price relative is calculated by taking the ratio of the current month s average price and the base month s average price. For example if the average price paid for rice paid in February was $4.95 and the base as listed in the table is $4.49 then the price relative is calculated as: Average Price paid in February = $ 4.95 Base price cost $ 4.49 Price relative = $ Column (f) calculates the weighted price relative for each item. This is done by multiplying the resultant figure from column five (5) by the base weight of the item. The weighted price relative is calculated as: Weighted price relative = base weight x price relative = 6.24 x = These processes are performed for each item within each section of the index and for each section, the resultant weighted price relative is summed to give a total weighted price relative for each category. 10

11 Worksheet Three (3) (a) (b) (c) (d) WEIGHED SECTION & GROUP WEIGHT PRICE PRICE INDEX RELATIVE (a) All Cereals And Bakery Products (b) All Meat, Poultry And Fish All Dairy Products And Eggs (d) All Fats And Oils (e) All Fruits And Vegetables (f) All Non- Alcoholic Drinks And Beverages (g) All Other Foods All Food Alcoholic Drinks And Beverages Clothing and Footwear Accomodations Medical Services Fuel and Light Household Furnishings, Supplies and Operations Transportation Education Personal Services Other Services ALL ITEMS The table above shows a section from an actual worksheet table 11

12 This worksheet calculates the actual price index and shows the changes in each category relative to the base year. Column (a) shows the various categories in the index. Column (b) shows the total base weights for each index. Column (c) shows the total weighted price relative for each group and this figure is linked by worksheet two (2). Column (d) calculates the weighted price relative for each category or section. These figures are relative to the base year. This price change is referred to as the index and shows movement in prices relative to the base year. The index for all foods is calculated by dividing the group weighted price relative by the group weight, then multiplying the resultant figure by 100. Index for All Foods = (Weighted price relative\weight) x 100 = * = Price indices are computed for each category in the same manner. These index numbers are then linked together to obtain an aggregate index. This movement or average change in price is identified as the All Items Index and provides a measure of the rate of inflation or deflation. All Items Index = (Total price relative/total basket weight) x 100 = * =

13 Final Sheet (a) (b) (c) (d) (e) (f) (g) % Inc/dec %Inc/dec SECTION AND GROUP WEIGHT JAN 01 FEB 01 FEB 00 FEB2001 FEB2001 JAN2001 FEB ALL FOOD (a) Cereals and Bakery Products (b) Meat Poultry and Fish (c ) Dairy Products and Eggs (d) Fats and Oils (e) Fruits and Vegetables (f) Non-Alcoholic Drinks and Beverages (g)other Foods ALCOHOLIC DRINKS AND BEVERAGES 3. CLOTHING AND FOOTWEAR ACCOMODATIONS MEDICAL SERVICES FUEL AND LIGHT HOUSEHOLD FURNISHINGS SUPPLIES AND OPERATIONS 8. TRANSPORTATION EDUCATION PERSONAL SERVICES OTHER SERVICES ALL ITEMS The table above shows a section of an actual worksheet table 13

14 Calculation of the Inflation Rate The CPI is an important indicator in that it is used primarily to measure the rate at which the average price of goods and services change over time or in other words the rate of inflation. Worksheet four serves to calculate these changes on a monthly and yearly basis. Column (a) shows the various groups and subgroups. Column (b) shows the weights assigned to each group and sub-group. Column (c) holds the index figures for the previous month and these are manually entered into the machine. Column (d) displays the figures for the current month Column (e) shows the figures for the same month in the previous year and these figures are also manually entered into the machine. Column (f) calculates the percentage change between the current month and the previous month. This calculation is done by dividing the figures in the current month (column d) by the corresponding figures in the previous month (column c) The price change between January 2001 and February 2001 is calculated as follows: February 2001 index January 2001 index x 100 January 2001 index = ( ) * = 0.3 % There was a 0.3 % change in prices between the months of January 2001 and February Column (g) represents the year-to-year change in prices and this is calculated using the same formula as the month-to-month change. The price change between February 200 and February 2001 is calculated as follows: February 2001 February 2000x 100 February 2000 = ( * = 1.9 % There was a 1.9 % change in price between the months of February 2000 and February

15 OUTSTANDING QUESTIONS 5. Treatment of Housing a. Describe your treatment of Housing in the computation of the Index 6. Quality considerations 15 Linking a. Describe any imputations made e.g. for missing prices, change in quality, introduction of new items 15.1 What method do you use for linking indices with different Base years SECTION 111 : OTHER ISSUES 1 Indicate who are the main users of the CPI and for what purposes. 2 State your policy for revision of the base year, the weighting system and the basket of goods and services. 2. Indicate any outstanding or significant issues for consideration or implementation and any developmental work in progress. 15

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