Methodology Manual for the (National) Consumer Price Index (CPI) Base Year: 2009=100 (Preliminary version)

Transcription

1 Methodology Manual for the (National) Consumer Price Index (CPI) Base Year: 2009=100 (Preliminary version) National Statistical Institute Office of the Director of Operations Department of Price Statistics Santiago - February 2009

2 TABLE OF CONTENTS Pages 1. Introduction 4 2. Definition of the Index Definition and objectives of the index Index time frame Index reference period Price reference period Reference period of weights Geographical coverage of the index 7 3. Expenditure considered in the weighting of the index Expenditure included/excluded in the CPI basket Treatment of taxes and subsidies Exceptional situations regarding transaction prices 9 4. Definition of the consumption basket The COICOP classification system Basic concepts Selection criteria for groups, products and varieties Definition of weights Updating of weights according to the base period Weights of the divisions Price registration Monthly distribution of the Index Calculation of the index Data collection Price collection procedure Collection and treatment of prices One observation a month More than one observation a month Special cases: household price survey Housing rental Domestic service Special cases: prices collected from companies Housing, water, electricity, gas and other fuels Maintenance and repair of the dwelling Health Transport Communications Recreation and culture Educational services Miscellaneous goods and services Special cases: Treatment of missing prices Treatment of missing prices when an item is out of stock Treatment of seasonal and temporary missing prices Goods or services provided on a free-of-charge basis Quality adjustments Techniques and criteria used to guarantee quality Series linking Basket: CONSUMER PRICE INDEX (CPI) Annual Base 2009=

3 12. Glossary 13. Appendices Appendix 1: Features of the CPI Base 2009=100 compared to the CPI Base December 2008=100 and December 1998= Appendix 2: Classification comparison of CPI base 2009=100 with CPI Base December 1998= Appendix 3: Classification of individual consumption according to purpose (COICOP), Examples Appendix 4: Variety examples Appendix 5: General algorithm used for CPI calculation Appendix 6: Aggregation towards higher levels Appendix 7: Calculation of index variations Appendix 8: Calculation of impacts Appendix 10: Sample of establishments Sample frameworks used Selection from the sample of establishments Appendix 10: Exceptional situations regarding transaction prices Discount prices or promotions Changes in the presentation format Prices of missing varieties Appendix 11: Data validation Appendix 12: Statistical quality of the Index Appendix 13: Calculation of the base year Appendix 14: Quality adjustment method for motor-vehicle options Appendix 15. List of special calculations Appendix 16: Analytical indices Appendix 17: Programme of CPI improvements Appendix 18: Examples of imputation exceptions 14. Bibliography 3

4 1. Introduction The National Statistical Institute of Chile (INE) presents the Consumer Price Index (CPI) Methodology Manual 1, with annual base 2009= The geographical coverage of the new CPI now includes all regional capitals and their urban zones. In contrast to previous indices, which were based on a month, 3 the reference period for the new CPI is the year The CPI base 2009=100 represents the conclusion of a process to expand the geographical coverage of the CPI, moving from price collection in the Greater Santiago area to one that includes all of the country s fifteen regional capitals and their urban zones. The purpose of this document is to make the changes, improvements and decisions involving the CPI base 2009=100 available to all interested parties. The document is organised as follows: index definition; types of expenses included; definition of the basket; monthly publication of the index; calculation of the index; data collection and treatment; techniques and criteria to guarantee CPI quality; linkages between the new CPI and the previous indices; bibliography, glossary and appendices. This work would not have been possible without the joint effort of professionals, price researchers, data typists, supervisors, coordinators and IT professionals, together with the contributions and revisions undertaken by national and international experts Previous Consumer Price Indices used the base December 2008=100, December 1998=100 and April 1989=100. See National Statistical Institute of Chile (1999) pp for a more comprehensive explanation of the historical background associated with the construction of the CPI in Chile. Hereafter referred to as base 2009=100. The calculation procedure for the annual base can be found in Annex 14. 4

5 2. Definition of the Index 2.1. Definition and objectives of the index The Consumer Price Index (CPI) base 2009=100, measures price variations of a basket of goods and services typically consumed in households located in all of the country s regional capitals and their urban zones. 4 The definition has been set according to the concept of household expenditure within the territory of Chile, which is consistent with the objective of calculating the price variations that consumers may encounter. The CPI (and its variation) is calculated and published on a monthly basis. This index is principally used for two purposes: a) To monitor the development of consumer prices over time (inflation), given that their behaviour has an impact on: the monetary policy as defined by the appropriate authority 5, the development of the Unidad de Fomento or UF (an inflation-indexed unit of account used in Chile) 6, the Monthly Tax Unit (Unidad Tributaria Mensual or UTM) 7, fluctuations in utility services tariffs 8, and deflation in household expenditure within National Accounts, among other uses. b) Variation as a proxy of the cost of living 9, enabling contracts to be indexedlinked Definition supported by ILO et al. (2006), page 559. In Chile, the Central Bank is the body that governs economic policy and its main goal is to keep inflation at low, steady and sustainable levels. In order to fulfil this mission, the Central Bank sets a target for inflation each year, keeping it under control by modifying the monetary policy rate on a monthly basis. For further information visit: This unit of account is adjusted according to the monthly variation of the CPI. More information available at: Chilean unit of account equivalent to a given amount of money, in Chilean pesos, and determined by law (Decree Law 830 published in Chile's Official Gazette -Diario Oficial in Spanish- on 31 December 1974); this unit is constantly updated according to the Consumer Price Index (CPI) and is used to calculate taxes, fines and custom duties. Definition translated into English from the following source: In Chile, several utility services readjust their tariffs according to the CPI or include the CPI in their polynomial calculation. Such services include electricity and sanitation services. See, as an example, electricity supply pricing: udo_abr08.pdf Even though the CPI is an indirect indicator of the cost of living, it is frequently used for this purpose. When the CPI is defined as a cost-of-living index, changes in household expenditure needed to maintain their standard of living are measured. See ILO et al. (2006), pages 50-51, chapter 17. Indexation is a process by which monetary values are adjusted according to price changes. Consequently, the indexation of contracts aims to maintain purchase power at a constant level. Examples of contracts include those for employment, accommodation rental and sales on credit. 5

6 To construct the index, the prices of goods and services of a set basket representing the average expenditure of urban households 11 within the country s borders are monitored on a monthly basis. Excluded from this calculation are communal dwellings (such as children s and old people s homes, barracks, hospitals and boarding schools) as well as expenditures made by Chilean citizens living abroad. Only monetary prices are included, thus any type of social transfer 12 and non-cash expenses 13 are excluded. The CPI base 2009=100 has an acquisitions approach 14. This means that the total value of goods and services purchased within the country in a given period of time is registered, regardless of them being wholly or partially consumed in that period and irrespective of the method of payment (cash, cheque or credit card) or if a financial liability is incurred when payments are made Index time frame Index reference period The reference period or base of the index corresponds to the time period of the base, which may be a month, a year or any other period, during which the value 100 is fixed, and all indices that are calculated are compared to this period. In the case of the CPI the base is the year 2009= In the following sections, more details are provided regarding how the basket is formed, although it can be stated that its structure is based on the Sixth Household Budget Survey See: Transfers are generally provided by the State and refer to the action of providing goods, services or financial assets where the beneficiary does not need to provide another good, service or financial asset in return, thus affecting the beneficiary s income and not the level of prices. All those transfers that affect the prices paid by households fall within the CPI. There are three different categories: barter transactions (households exchange consumer goods and services among themselves), in-kind payments (households pay for the goods and services they receive with work) and the production of goods and services for self-consumption. The acquisitions approach is usually adopted when the CPI is used as a macro-economic indicator. The other two alternatives are the use approach and the payments approach. The use approach deals with goods and services actually consumed by households to satisfy their needs and desires. The payments approach focuses, for CPI purposes, on households' actual spending in order to acquire consumer goods and services, and is often used when the main purpose of the index is to monitor adjustments to earnings or income. When a good or service is acquired that is financed by credit, two economic transactions take place: (i) a good or service is acquired or sold, and (ii) a financial obligation is established, in which interests need to be paid. 6

7 Price reference period This refers to the period in which prices are compared to those of other periods, or rather, the period used to calculate the elementary indices. In the CPI, the price reference period is 2009= Reference period of weights. Each product included in the CPI basket has a weight that enables the aggregation of higher-level indices until reaching the CPI. The weight is the expense ratio (relative weight) of a product within total household expenditure. The expenditure weighting structure in the CPI base 2009=100 is derived from the Household Budget Survey 16 (HBS), carried out between November 2006 and October These values are based on April and correspond to a sample of 10,390 households representing an urban population of 9.8 million people Geographical coverage of the index The CPI base 2009=100 is built on price and expenditure information from regional capitals and their urban zones in the country s fifteen regions. A comparison of CPI base 2009=100 with the CPI base December 2008=100 can be found in appendices 1, 2 and The methodology and results derived from this survey are available on the INE website: For regions 14 and 15, the survey was carried out between September 2007 and August 2008, as these regions were created following the start of the survey in The total expenditure for each month is expressed in the value of Chilean pesos in April 2007, in order to make values comparable with those reported each month by the Household Budget Survey. 7

8 3. Expenditure considered in the index weighting Expenditure included/excluded in the CPI basket The conceptual framework used to include or exclude costs from the CPI basket can be found in the System of National Accounts 1993 manual, 19 however, the definition and purpose of the CPI base 2009=100 resulted in the exclusion from costs of services related to owner-occupied housing, barter transactions, goods and services produced via own-account, and in-kind payments for goods and services, as these are not considered to be financial costs. Other exceptions are the inclusion of the purchase of second-hand cars and the exclusion of interest paid on financial intermediation services. The following monetary payments within the country are included as costs: - Household purchases of goods and services for final consumption. The cost of delivery will also be included in the event that the size and volume of a product prevents or discourages the consumer from taking it with them personally after purchase - Purchases of second hand cars by households - Transactions in which the final price includes indirect taxes such as VAT, tax on tobacco, specific tax on fuel, stamp duties and the tax on alcoholic beverages, among others. - Administrative rights for services rendered, such as payments to obtain a driver s licence, operator s licence for amateur radio, or fees for the issuing of certificates. - Financial costs (commissions) associated with: mortgages, consumer loans, borrowing facilities, credit cards issued by banks, credit cards provided by department store chains, the opening and maintenance of current accounts. - Rents effectively paid by households. - Registration fees to join a club or society, given that they provide the right to use the corresponding facilities. The following non-consumption costs, that is, those in which there is no flow of goods or services in return, are excluded from the CPI basket, as well as all costs incurred outside of the country's borders: 19 System of National Accounts (1993), see Chapter IX, B. Expenditures, acquisitions and uses. Available at: 8

9 - Investment: purchase of homes 20, properties, valuables 21 or financial assets (bonds, shares or securities acquired by households) and major housing repairs that increase the value of the property. - Interests on financial transactions where a loan is agreed (for example, loans issued by department stores, personal loans and mortgages) or life insurance premiums Interest and administrative fees on payments in arrears for purchases made on credit. - Acquisition of assets: contributions to private pension funds (AFP in their Spanish acronym) or to the State pension fund (INP). - Collective services provided by the State, including: public administration, defence, justice and the legal system. - Prices that are considered virtual transactions, such as the imputed rent of owneroccupied housing, which is valued in pesos, but where there is no actual transaction. - Transfers (received and paid) 23 : gifts, grants, direct taxes (such as income and real-estate taxes) and licenses 24 (including licenses to own or use vehicles, such as the municipal road tax, 25 and for boats and aircraft, and hunting and fishing permits). - Tips or gratuities, which are not mandatory in Chile (are not considered consumption expenditure but rather a transfer) Housing units fall outside the CPI basket as they are considered fixed assets (investments) and not as durable consumer goods. These are expensive durable goods that will not depreciate over time and are excluded from the CPI because they are not used for consumption and are purchased primarily as a store of value (for example: works of art, and precious stones and metals, together with the jewellery made from these last). This is a compound transaction, as a financial right is purchased (which falls outside the scope of the CPI) and there is a service fee (which is part of the CPI). For example, in the case of life insurance policies these usually include a long-term investment service that provides a financial reward if the insured survives the policy term; the policy also includes a fee service for managing such an instrument. Minimum welfare pensions granted by the State are examples of such transfers. When the payment is completely disproportionate to the cost of the service provided, the rights are therefore classified as taxes for the use of a good or as a permit to use goods or undertake activities, an example being the municipal road tax or payment for burial rights in a cemetery. Many countries include taxes for the use of private vehicles because, for the purpose of the CPI, they are viewed as consumption taxes, the decision to include or exclude them from the CPI depending on the respective statistical office. In the case of Chile, the decision was taken to exclude them as they were seen as a tax on the property value of the vehicle. Gratuities would fall inside the scope of the CPI if they were compulsory and formed an integral part of payment for a service. However, this is not the case in Chile. 9

10 Treatment of taxes and subsidies The treatment of taxes 27 and subsidies 28 in the construction of the CPI follows the conventions adopted in the System of National Accounts (SNA) , particularly when defining whether it is a direct tax or an administrative fee (this category includes property taxes and different licences including municipal road tax). The general principles and criteria pertinent to the Chilean CPI can be summarised as follows: a) Taxes and subsidies are compulsory transfers to (or from) the State, where one unit provides a good, service or asset to another without receiving any good, service or asset in return, that is, transactions where there is no direct requited payment. These are therefore excluded from the CPI. b) Consumption taxes or special purpose taxes are included in the CPI because they are part of the final price paid by households, an example being VAT. In contrast, taxes on income or property, along with duties charged for using a good or asset, are excluded from the CPI, as these levy a charge for the generation and use of an asset and not its consumption. Property taxes, registration fees in order to use a vehicle, boat or aircraft, municipal road tax, and hunting or fishing permits, 30 also fall into this category. c) Administrative fees (or payments) are viewed as the acquisition of a service, and their prices are included in the CPI calculation, provided that the government agency delivers in return to the person making the payment some kind of service, such as issuing a driver's licence. d) Subsidies are considered in the price collection if they are not discriminatory (that is, any consumer or person can access the subsidy without restriction, whether due to their economic situation or other reason). Consequently, all discriminatory subsidies fall outside the scope of the CPI Referring to a payment made by households and/or businesses to the government, which are used to finance public spending. Subsidies may be treated as negative taxes that help consumers to pay a lower final price. From a methodological point of view, subsidies are included in the general treatment provided that they are not discriminatory. See System of National Accounts (1993), paragraphs 8.54 and The approach adopted by the System of National Accounts is to consider such expenses as current taxes. 10

11 Exceptional situations regarding prices The guiding principle for the collection of prices in the CPI, is to register prices (unitary or in the unit of measurement specified in the definition of each variety) 31 paid by a buyer to purchase a good or service. However, it is possible that when the researcher gathers information from an outlet, it is discovered that the price has changed as a result of: a discount, promotion or simply because at the time the product is not available under the specifications set for that variety. In the exceptional circumstances of price discounts, the following general principles must be followed: a) Discounts must be attributable to the individual purchase of a good or service, b) They must be available to all potential consumers, with no special conditions attached (non-discriminatory), c) The buyer must be aware of the discount at the time of purchase, and d) The discounts must be clearly identified (advertised) in a visible place or places, so that the price researcher doesn t need additional information to understand when the offer is available. A total of twenty special situations have been considered for the treatment of prices, eleven of which are exclusively for calculating the final price of the discounted item; the remaining seven relate to special treatment in the event of missing prices or the addition of new items or features. More details are available in Appendix Definition of the consumption basket 4.1. The COICOP classification system The system of Classification of Individual Consumption According to Purpose (COICOP) is a functional categorization of SNA 1993 that imposes a strict separation between goods and services and facilitates international comparability. Goods and services are arranged in 12 divisions (higher level of aggregation), which are formed by the aggregation of groups. The groups consist of classes and these in turn are composed of subclasses. The subclasses are the result of aggregation of products, which are formed from the aggregation of varieties (elementary aggregate). The higher levels of aggregation allow international comparison, while the elementary aggregates such as product, variety and variety-establishment are subject to the 31 For a definition of variety see page

12 definition in each country according to their corresponding characteristics 32. The structure is as follows: Figure 1 Example of the classification system, CPI base 2009=100 División-Grupo-Clase-Subclase-Producto- Variedad Promedio aritmético ponderado Media geométrica Division-Group-Class-Subclass-Product- Variety Weighted arithmetic mean Geometric mean IPC CPI 32 Three examples are included in Appendix 4 of this document. 12

13 Alimentos y bebidas no alcoholicas Bebidas alcohólicas y tobaco alimentos bebidas no alcoholicas Pan y cereales carne Arroz todos los tipos harina de cereales pan y otros productos panaderia pan galletas pan correinte sin envasar pan especial sin envasar pan envasado Variación establecimiento Food and non-alcoholic beverages Alcoholic beverages and tobacco Food Non-alcoholic beverages Pan and cereals meat Rice, all types Cereal flours Bread and other bakery products bread biscuits Unwrapped normal bread Unwrapped special bread Wrapped bread Establishment variety clasificación CCIF clasificación propia COICOP Classification INE Classification The following table summarizes the composition of each level. 13

14 Table 1 Components of the CPI base 2009=100 (in numbers) Division Group Class Subclass Product 1. Food and non-alcoholic beverages Alcoholic beverages, tobacco and narcotics Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance 6. Health Transport Communications Recreation and culture Education Restaurants and hotels Miscellaneous goods and services TOTAL Basic concepts Price The price is the nominal transaction value (in monetary units) of a good or service. The price may or may not include home delivery, but must include all indirect or direct taxes currently in force and take into account any existing non-discriminatory discounts and any discounts not subject to a specific means of payment. Thus, it should be the universal access price, that is, the price that any resident must pay to receive the good or service. Product A product is a generic term to refer to a good or service that has a weight in household expenditure and is formed with a set of homogeneous varieties. Goods Goods are physical objects for which a demand exists, over which ownership rights can be established and whose ownership can be transferred from one institutional unit to another by engaging in transactions on markets SNA (1993), paragraph

15 Goods are in demand because they may be used to satisfy the needs or wants of households. The production and exchange of goods are quite separate activities and this is an economically significant characteristic that sets them apart from services. Goods are classified as durable and non-durable. Durable goods are physical objects that produce the necessary services to meet the desires and needs of consumers 34 and that can be consumed over various time periods. Examples include furniture, household appliances, motor vehicles and clothing. A non-durable good is one which is used up entirely once consumed, such as food and beverages that are used to satisfy hunger and thirst 35. In the case of food, there is a class of non-durable goods that disappear even if they have not been consumed: perishable goods. Perishable goods are non-durable goods that decay rapidly and need special treatment to increase their shelf life (expiry date within one month); fresh foods (fruit, vegetables and chilled meats) generally fall into this category. In contrast, non-perishable goods are non-durable consumer goods that have been processed on an industrial or small-scale level. These do not need refrigeration and have a long shelf life; examples include canned, pickled and dried foods. Services Services 36 are products that cannot be traded separately from their production. Services are produced to order and typically consist of changes in the conditions of the consuming units realized by the activities of producers at the demand of the consumers. By the time their production is completed they must have been provided to the consumers. The changes that consumers of services engage the producers to bring about may be temporary or permanent and can take a variety of different forms - in particular: a) Changes in the condition of the consumer s goods: the producer works directly on goods owned by the consumer by transporting, cleaning, repairing or otherwise transforming them; This term refers to a form of economic unit, usually a person or household. ILO et al. (2006), paragraph 3.3, page 47. See ILO et al. (2006), paragraph 3.22, page 49. Eurostat et al. (1993), paragraphs

16 b) Changes in the physical conditions of persons: the producer transports the persons, provides them with accommodation, provides them with medical or surgical treatments, improves their appearance, provides education, recreational services, financial intermediation, etc.; From a methodological and operative standpoint, services are divided into minor and special categories. Minor services are those whose classification does not represent a high degree of complexity at product and variety level. Characteristics include: (a) their prices do not require special treatment to be entered into the CPI calculation and (b) prices of different varieties are collected directly from establishments, which is similar to the way goods are treated. Some examples of minor services are: hairdressing, shoe repair and furniture restoration. Special services (or special calculations) are all those measurements (or methodologies) that aim to retrieve a price that can not be obtained from a direct observation at a point of sale. Examples of such services include: standard bills for electricity, drinking water and telecommunications services. ******************************************************************* 16

17 Variety The term variety refers to a good or service defined by a set of standard attributes or specifications 37 such as: - Brand: corresponds to the fantasy name or that linked to the manufacturer or product lines - Description: set of attributes of a variety, such as its smell, flavour, segment or type, colour, measurement and presentation units. - Packaging: final packaging containing the product, which may be formed by different types of materials or a mixture of materials, such as: glass, tin, aluminium, cardboard, polyethylene, polypropylene, tetra, and so on. - Weight or volume: number of units or net weight in the presentation of each product. - Unit of measure: the units of weight, volume, length, etc. corresponding to each product, expressed in grams, cubic centimetres, number of units, etc. - Origin: the origin of a product, which defines whether it has been produced locally or abroad (imported). - Barcode (Global Trade Item Number or GTIN): a unique and descriptive record of each product as a variety. This identifier has been adopted as a global standard to encode consumer goods. Varieties correspond to a product, are not subject to weighting, and are the object to which prices are assigned within an establishment Criteria used for selecting groups, products and varieties that make up the basket The benchmarks used to select groups and products from the Household Budget Survey (HBS) that are included in the basket of the CPI base 2009=100 must meet the following criteria: At "Group" level, the minimum benchmark weight for total expenditure is: - 0.1% in Division 1, "Food and non-alcoholic beverages - 0.2% in all other divisions Once the groups of each division have been selected, "products" are considered according to the following criteria: a) A minimum benchmark for the weight of the product of 0.020% in total household expenditure 37 Standard denotes the set of attributes applied to most of the goods in the basket. Two examples are included in Appendix 5. 17

18 b) The existence of product expenditure in four of the five quintiles according to per capita income. Finally, products are excluded if their price collection is operationally unfeasible. Like the December 2008=100 basket, the base 2009=100 basket includes products from the December 1998=100 basket, which are maintained, given their weighting registered in the Household Budget Survey, in four different ways: a) products that have been maintained, b) products that have merged with another and changed their name, 38 c) products that have merged with another and established a new product d) products that have transformed into a variety. Also, there is a group of products that no longer form part of the basket because of the following reasons: a) they are obsolete 39, b) they do not meet the selection criteria 40 and c) they are not considered consumption expenditure 41. The information used to select the varieties was derived from: market studies, structural surveys and large chains of department stores. Quantitative information on sales from 2007 identified the varieties that are part of the CPI basket with base December 2008=100. The relevance of the different varieties are reviewed on a yearly basis, using for that purpose their share of the market share, so that the varieties are the most representative within household consumption. To select a variety, the following general criteria were used: a) Representation. The basket is made up of those varieties that have the highest relative impact on sales. b) Permanence. The variety must be present in the market for a reasonable period of time of at least two periods. c) Degree of difficulty in terms of measurement. Priority is given to those varieties with a low level of difficulty in terms of measurement and monitoring over time, according to field observations and the lessons learned from the registration of outlets. From an operational point of view, varieties with high degrees of difficulty were only selected when it was absolutely necessary. d) Consumption habits. There are certain goods that belong to a given class, although the way they are bought or used at local level leads them to being classified in another, avocados and lemons being one example: both are fruits, thus according to the COICOP classification they belong to the fruit category Examples of merged products that have transferred from the December 1998=100 basket to that of December 2008=100 are as follows: Chard now known as chard and spinach ; air fresheners now referred to as household air fresheners and disinfectants ; engine oil referred to in the new CPI asx lubricants and oils for motor vehicles. Photographic film, calculators, cassette tapes, computer diskettes, video players and walkmans are examples of items that were withdrawn from the CPI basket. For example, landline telephones, Martini and candleholders. This group includes: mortgage payments, real-state contributions, vehicle licence and car registration fees. 18

19 However, domestic consumers treat these as vegetables, so they have subsequently been classified in the Vegetables and tubers class Definition of weights The weights in the CPI base December 2008=100 are based on the Household Budget Survey (HBS) However, costs related to barter, production for personal use, and investments and transfers that do not represent consumption expenditure were excluded. Weights remain fixed and constant from product level and up to the higher level, given that this is a Laspeyres-type index. At the lower levels (varieties) there are no weights Updating of weights according to the base period The expenditure weights necessary to calculate the indices are valued in Chilean pesos for April 2007, the main month in which the Household Budget Survey took place. However, the base period for the Greater Santiago CPI is December 2008=100, and care is taken not to implement any updating without base information provided by a household budget survey Weights of the divisions The application of the inclusion and exclusion criteria mentioned in section 4.3, results in the following structure of weights by divisions. Table No. 2 Weights of the different divisions that form the CPI Weight in the Division CPI basket (%) 1. Food and non-alcoholic beverages Alcoholic beverages, tobacco and narcotics Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance Health Transport Communications Recreation and culture Education There are three alternatives to provide up-to-date expenditure weights: (i) using information from the most recent household budget survey, (ii) using external data to adjust some of the weights, and (iii) using the price changes experienced by the goods and services that make up the basket (See INE Chile (1999) pages and ILO et al. (2006) pages ). However, this procedure creates a distortion by modifying the expenditure structure without taking into account the effects of substitution, income, and quantities consumed, or the changes in consumer preferences. 19

20 11. Restaurants and hotels Miscellaneous goods and services Price collection The CPI for Greater Santiago includes prices in Chilean pesos, which is the legal currency; however, some goods and services are traded in other units of account. The criterion used to convert such units into pesos are as follows:: a) Goods and services denominated in UF or UTM: These are converted into Chilean pesos according to their value on the fifteenth day of each month. Services priced in UF include monthly tuition fees, bank commissions and commissions charged by department stores; prices charged in UTM include rubbish collection. b) Goods and services priced in US dollars: These prices are converted into Chilean pesos at the exchange rate reported by the outlet when the price collection 43 is taking place. Examples: international airline tickets and hotel accommodation. 5. Monthly publication of the index The CPI and its variations are published within the first eight days of each month, according to a timetable agreed at the beginning of every year and that is available on the INE website: The Index appears at 8 am on its day of publication. The general index; monthly and inter-annual variation; and disaggregations by division, group, class, subclass and product, along with the impacts, 44 are freely available to the public in both printed and electronic format. 6. Calculation of the index The CPI is constructed in two stages: First stage: Elementary aggregates are calculated with the price information available for each variety-outlet An elementary aggregate is a micro-index corresponding to a (relative) ratio of prices. The variations of each micro-index are averaged by geometric mean, as there is a high degree of substitution between the varieties. Second stage: Elementary indices are joined together to form the higher level indices. A weighted arithmetic mean is used from the product level up to the CPI level The procedure is applicable to any good or service where the price is fixed in a foreign currency. In this case, the variation of prices includes the exchange rate variation of the peso to the foreign currency. An impact measures the weight or contribution of a given index in explaining the variation reported by the CPI over a given period of time, such as the impact of food prices on the annual variation reported by the CPI. The mathematical calculation can be found in Appendix 9. 20

21 The general algorithm used to calculate the CPI base December 2008=100, and the calculation of the index, its variations and impacts are presented in Appendices 6 to 9. Finally, the successive addition of higher-level indices allows calculation of the CPI for t a given period, constructed with a Laspeyres formula. A Laspeyres price index ( P ) maintains quantities fixed in a base period (period 0), and is calculated for each period as follows: P t N i= 1 = N i= 1 p p t i 0 i q q 0 i 0 i p t i = n j= 1 t vj t 1 v j 1/ n Where: t p i : Prices of goods and services i in period t 0 p i : Prices of goods and services i in base period (t=0) 0 q i : Quantity of goods and services i in base period (t=0) N : Total number of goods in the basket t v j : Price of variety j in period t t 1 v j n : Price of variety j in period t 1 : Number of varieties. The annual variation of the CPI is the product of the monthly variations. This index can be expressed as the weighted arithmetic mean of price relatives using as weights the shares in expenditure during the base period. The CPI is calculated as follows: N t N t p i t IPC( t) = I = w *100= *100 0 i Ii wi i= 1 pi i= 1. 21

22 Where: w i : denotes the cost weight of product i t I i : price relatives for product i in period t The table below summarizes the aggregation methods. Table No. 3 Aggregation methods Level of aggregation Aggregation method From divisions to CPI Arithmetic mean From group to division Arithmetic mean From class to group Arithmetic mean Weighted From subclass to class Arithmetic mean From product to subclass Arithmetic mean From variety to product Geometric mean Equally From type of outlet to variety Geometric mean represented 7. Data collection The collection of information involves: defining the varieties, availability of their relevant specifications and the existence of price collection procedures. A price is the market value of a good or service at the time the buyer incurs in liability to the seller. The price may or may not include home delivery, but it must include all indirect or specific taxes, non-discriminatory discounts, and discounts not depending on specific methods of payment. So, prices recorded are those universally observed regardless of the method of payment or type of customer. Prices required for calculating the CPI are secured in two ways: directly from the selected points of sale, or secondly, from company head offices. The latter is known as a centralized collection procedure. Prices are centrally collected when the price level in the various outlets of the same company are identical and outlined by the head office, and when they correspond to companies that provide regulated services. In both cases the information is collected directly from the head office Price collection procedure A frequency of collection is established according to price variability. For example, goods and services with more volatile prices are recorded more frequently during a measuring period. 22

23 Evidence from quantitative exercises support the decision to collect prices during the first three weeks of the month, except for fuels, intercity bus fares, fruits and vegetables, and sports stadium tickets, which are all collected four times a month. Specifically, price collection through the month is as follows: Table No. 4 Frequency of data collection Products Perishables, except fruits and vegetables(*) Non-perishable Food prepared away from the home Services Fuels Interurban bus fare (**) Sports stadium tickets Monthly price collection (number of times a month) X X X X X X X Notes: (*) plus a price collection on Saturday (**) prices are recorded every Friday Regarding operational procedure, the price survey is carried out from the first working day of the month up to the 22nd, from Monday to Friday and on two Saturdays. Prices belonging to the food division are collected in the morning (between 9:00 and 12:00), with the emphasis placed on street markets and restaurants. Prices of all other divisions are collected during the afternoon. In the case of financial expenses, insurance, fixed and mobile telephone services, among others, the deadline for surveying such services is the 15th of each month, while that set for data reception is the 25th of each month. The prices of education services are collected in December and March, while those for university exam preparatory institutes ( preuniversitarios ) are also collected in July, August and September. 23

24 7.2. Collection and treatment of prices One observation a month The price collected is entered unchanged into the CPI calculation system; examples include personal care products, maintenance and cleaning of the household, medicaments and clothing More than one observation a month For products whose prices are surveyed more than once a month, an average ( PM t ( e ) ) price is calculated from the equally-weighted average of observations of an outlet during the month the CPI is being calculated, explained as follows: PM t ( e) = n i= 1 p i N Significance: e : Outlet t : Month N : Number of collected prices p i : Collected prices Special cases: household price survey Data collection is carried out through direct surveys of households, using the CPI with base December 2008=100 to measure the prices of products for households, such as rent and domestic service. The way this procedure is calculated is presented in the following sections Housing rental To be consistent with the conceptual framework of the CPI base December 2008=100, owner-occupied houses have been excluded, thus avoiding estimates of the socalled "imputed rent. The monthly amount paid for housing rental purposes (houses and apartments) is calculated as a self-weighted geometric mean applied to changes in rents reported by the sample of households. Additionally, prices from real-estate websites and in the press are also taken into account. The sample of rented dwellings was secured through stratified random sampling and appropriate distribution by income quintiles Domestic service The domestic service measured in the CPI base December 2008=100 is defined as multiple tasks such as cleaning, washing, ironing, childcare and cooking services provided by live-in or live-out maids, working either full or part time. 24

25 The monthly monitoring is carried out by surveying households that spend on domestic services, complemented with a component of the Earnings Index calculated by INE. To determine the monthly variation in domestic service expenditure, the geometric mean of the variations of the two mentioned varieties is calculated. The sample design for domestic service is similar to the sample for rented housing. The objective is to secure a representative sample of households that incur in such expenditure for live-in or live-out domestic staff, full or part-time Special cases: prices collected from companies For some services, the only price that can be used is the total of the final invoice or bill; however, this has items that are not constant, meaning it cannot be used to calculate the CPI. Consequently, a "standard bill" by company is used, which involves undertaking a special calculation. A standard bill is the valuation of a set of "n" compulsory and supplementary items or components that make up the final value that a household has to pay for the service provided. In the case of utility services, like water and electricity, the amount payable has a fixed component (which does not depend on consumption) and another variable (which depends on monthly consumption). For communications services, a basket including minutes spent on local, long-distance and mobile phone calls Housing, water, electricity, gas and other fuels The division includes: home security along with water, electricity and gas supplies. a) Home security: Measured by means of the packages offered by Chile s main home security alarm companies. For each of these companies, which have the largest market share in terms of sales (weighted by installed units), a standard bill including the cost of installation, equipment leasing and the amount charged for the alarm and home surveillance service is established. Data related to the different components of the standard bill is collected on a monthly basis, and this information enters the CPI calculation as the weighted geometric mean 45 of the price variations reported in each standard bill. b) Water supply and sewerage: The price of this service is derived from a standard bill composed of fixed and variable costs, which also makes a distinction between peak and non-peak periods, valued according to the rate in effect on the fifteenth of each month. 46 The evolution of the standard bill defined for each of the companies operating in the Greater Santiago area is monitored on a monthly basis. For the purpose of CPI calculation, a weighted geometric mean according to the market share of companies providing water utilities is used The weight is derived from the market share of companies operating in this industry. These items are associated with a structure of consumption expressed in cubic metres per month 25

26 The standard bill can be broken down as follows: 47 - Fixed charge: A fixed, recurring charge that all customers pay whether or not they consume any water. This charge relates to administrative fees and costs that are not related to the company s service operation. - Variable charge at peak periods ($/m 3 ): Payment linked to increased water demand. In most cases, these charges are collected between 1 December and 31 March of each year. - Variable non-peak charge ($/m 3 ): Rates applicable from 1 April to 30 November each year. - Variable charge for over-consumption ($/m 3 ): This is the level of consumption above which over-consumption rates apply. This level is calculated in the period running from 1 July to 30 November each year. - Variable charge for sewage service: Amount charged for collecting wastewater from properties. This charge is proportional to water consumption. - Wastewater treatment variable charge: Amount charged for the wastewater treatment service, the aim of which is to ensure that the collected wastewater complies with current legislation and that sewage discharges into water bodies do not threaten environmental sustainability. This charge may appear as an additional charge to the variable charge for sewerage. c) Electricity supply: As with other basic services, the price used for CPI calculation is defined using a standard bill for each company, 48 which includes a given number of consumption averages (usually referred to as class brands) which are valued according to the respective rate segment. The weighted geometric mean of the variations reported in the standard bill of companies providing electric power in the Greater Santiago area is the value entered in the CPI calculation. The weighting value is the market share of each company. d) Gas supply: The gas supply is divided into network gas and liquid gas. The variation in the price of Mains Gas (town gas and natural gas) is obtained by assigning a value to the average consumption of a representative household using a standard bill for each gas distributor. Such a standard bill is composed of variable charges according to consumption and additional services. The most common tariff rate (that which has the highest percentage of use among customers) is used to establish the value of the standard bill. The weighted geometric mean of variations for the standard bill of each company is entered into the CPI calculation each month. Liquefied Petroleum Gas (LPG) is distributed in bulk and cylinder form Definitions were taken from The standard bill includes the fixed charge, meter rental (adjusted according to customer participation) and the variable costs directly linked with monthly consumption (charge for electricity consumed and electricity lines charges). 26

27 LPG in bulk: A standard bill for gas suppliers is established each year, with the value adjusted on a monthly basis, and in which gas consumption costs are differentiated between fixed and variable costs. LPG cylinders: This product does not require special treatment; therefore the general criteria for recording the prices of goods are applied. Each month, the prices of 15 kilo cylinders of LPG -both catalytic and regular- are registered at the sales outlets of distributors and sub-distributors Services for the maintenance and repair of the dwelling This subclass is formed by the product "services for the maintenance and repair of the dwelling", which includes the variety labour costs for services for the maintenance and repair of the dwelling". Such labour costs are composed of plumbers, electricians, carpenters, glaziers and interior painters services. In all cases, the price charged for each of these services is taken into account, and the figure used for CPI calculation is obtained from the geometric mean of variables in their values. 27

28 Health expenditure Expenditure in health services is divided into: (i) Medical products, appliances and equipment, (ii) Outpatient services, and (iii) Hospital services The first group is made up by a basket of medical products acquired by households in order to recover from illness. The other two groups include three different payment schemes - Fonasa (the National Health Fund), Isapres (private health institutions) or individual. a) Medical products, appliances and equipment: Medical appliances and equipment were selected based on the expenditure declared in the Household Budget Survey from and supplemented with information from external databases. For the purpose of price collection, the most traded varieties were selected. Pharmaceutical products are classified according to therapeutic groups 49, based on the Anatomical Therapeutic Chemical Classification System with Defined Daily Doses (ATC/DDD) of the World Health Organisation, 50 and the Vademécum guide. The criteria used to define the varieties that make up products included in the pharmaceutical basket are as follows: relative importance in spending, frequency of use and representativeness 51. b) Outpatient services: The cost is established for a set of medical consultations for different specialties, with prices collected for free modality choice (FMC), along with the prices agreed between health service providers and private health insurers, and those charged to individuals who are outside of the State or private systems. c) Hospital services: Hospital services taken into account are those that are most frequently used in both public hospitals and private health clinics. For the purpose of price collection, the procedure is similar to that used with outpatient services Transport The division consists of (i) goods associated with the purchase of motor vehicles (cars and motorcycles, new and used) along with spare parts and accessories, (ii) services associated with the maintenance and operation of vehicles, and (iii) public transport services Corresponding to the products in the CPI basket. Some products that do not appear in said classification were included, as these are important in terms of sales, such as drugs used to tackle obesity. As a whole, varieties have to account for at least 80% of weighted sales per unit sold. Also, the active compound must account for at least 70% of the sales of each product, and the daily doses and brand must represent at least 50% of product sales. Generic medicines are also included. 28

29 a) Purchases of motor vehicles: The criteria used to select motor vehicles are bestselling brand and model. The basket of new cars is built as follows: - Each year the best-selling brands and models of passenger cars (household use) in Greater Santiago are selected, making a distinction between normal and largesized cars (pick-up trucks, SUVs, etc.). - Two panels (normal cars and large-sized cars) are constructed by taking the brands and models that dominated the market in the previous year according to the criterion of sales weighted by number of units. - The highest selling version of each model is selected, given that the prices of different versions have a similar movement. The basket of second-hand cars is constructed using the twenty models with the highest representation in total sales for the years 2003 and 2004, in which the vehicles considered are five and four years old. For subsequent years, fouryear-old vehicles are incorporated while those that are six-years-old are withdrawn, and so forth. Monthly prices of new cars are collected from car dealers, while those for second-hand cars are collected from specialized websites and newspaper advertisements. b) Operation of personal transport equipment: Prices of i) spare parts and accessories for personal transport equipment, ii) fuels and lubricants, iii) maintenance and repair and iv) other services are registered on the ground following the general guidelines for collecting information. Toll charges are monitored according to the following criteria: i) toll charges for urban highways (peak-hours base rate, off-peak rate and saturation rate) and ii) tolls charged on the main inter-urban highways and the Pan-American Highway (Route 5). In every case, each of the rates charged for different time slots represents a variety. c) Transport services: There are four modes of passenger transport: railway, road, air and combined transport. The selection criterion used to select starting point and destination routes within the Greater Santiago area, and between major cities, was that of the most frequent use. For inter-urban transport services, the general approach was to identify varieties taking into account the distance travelled and journey time. The following paragraphs briefly explain the approaches used for the different modes of transport. - Passenger transport by railway. The product inter-urban train fares is composed of two routes: Santiago-Rancagua and Santiago-Talca. - Passenger transport via urban roads and public highways. The price of three products is taken into account: 29

30 Passenger transport service via urban roads: an average cost is calculated based on the daytime adult passenger fare, depending on existing rates for a share taxi and common taxi. Passenger transport by road: This corresponds to interurban transport by motorbus. The 15 most frequent origins and destinations were defined and the price of an adult passenger was collected for a normal or executive bus, according to the company concerned. Prices are collected four times a month for this category. School transport services: Household expenditure is calculated for round trips of primary school students in a journey covering approximately 20 blocks. - Passenger transport by air. Airline tickets are composed of two types: domestic and international flights. The prices 52 collected are those of the most frequently used origins/destinations, timetables and classes. This service is priced as a forward market, given that the cost of a plane ticket, including a week-long stay at a destination, is quoted during the last week of the preceding month. - Combined passenger transport service. This refers to an integrated public transport system formed by local (feeder) bus lines, main (cross-city) bus routes and the city s subway train service: the present combined service was introduced in Santiago in February An integrated fare system allows users to make bus-to-bus or bus-to-metro transfers for the price of one ticket, and within a time limit of 120 minutes, subject to a price scheme that includes a higher fare for travelling at peak hours depending on the type of transfer undertaken. 53 The price incorporated in the CPI calculation is the result of a weighted geometric mean, according to the level of use of the different tariffs in force (depending on the journey time and transport combinations used) within the combined public transport system Communications Division 8 covering Communications is divided into two groups: the first one accounts for the acquisition of communication devices (mobile phones) and the second incorporates communication services. This second group is subject to a different calculation process, given the complexities observed for this type of services. a) Postal service: Prices are monitored for letters sent and received within the country. b) Telephone equipment: Varieties were obtained through market research. Prices are collected for pre-payment mobile phones, with a distinction made between the 52 When the cost of a ticket is calculated in US dollars, or any other foreign currency, it is immediately transferred into Chilean pesos, using the exchange rate determined by the source for the corresponding day and time. 53 In April 2008, only one extra charge was introduced when transferring from any kind of bus to the subway. This fare scheme may vary in time depending on the decisions taken by the appropriate authorities. 30

31 normal and more sophisticated equipment available in shops, while information collected does not need to be processed in a special way. c) Telephone services: The methodology defined for the telecommunication services uses a standard bill for each company, in accordance with the Teligen or T- Basket 54 used by the OECD. The standard bill is based on the average number of minutes according to existing information, distributed among the different communication services that can be accessed. In order to set prices, a monthly calculation is made for each company, using the consumption set out in the standard bill with the tariff for day 15 of each month. The value included in the calculation of the CPI is a weighted geometric mean according to the participation of the companies that are active in the industry. Telephone services are divided into two sub-classes: residential telecommunication services and other telecommunication services. i) Residential telecommunication services. Four products have been defined: - Residential Internet connection: pre-payment and post-payment. These services are those which are contracted separately from combined or package services. The prices of the most frequent basic, medium and high plans are monitored, calculating a weighted geometric mean according to the participation of each plan in every company and the market share of the companies within the industry. - Telecommunication services packages. The prices collected are those of the most frequent grouped services (packages): 55 television, local telephony and Internet connection. The most frequent plans are monitored on a monthly basis, is conducted, and for the purposes of CPI calculation, a weighted geometric mean with the variations of the prices of tariff plans is calculated. The weighting factor is the comparative importance of the company within the industry. - Mobile telephony service: pre-payment and post-payment. Minutes (inside and outside the tariff plan) and sms messages of a standard bill or sample account are priced at the cost of a minute on day 15 of each month, taken from an average number of plans that concentrate the highest number of users each month. The growth in the cost of month-on-month mobile telephony services is calculated as a weighted geometric mean according to the market share of the companies that make up the CPI sample. - Residential telephony service: The standard bill includes a fixed charge (corresponding to the telephone line service) and a series of variable charges: 54 A mechanism used by the OECD to undertake comparisons between the telecommunications industries of different countries. Three profiles are constructed for users (low, medium and high consumption), according to call minutes consumed, and distributed according to the type of service used. For example, in the case of fixed lines, a distinction is made between local, mobile, national long-distance and international long-distance calls. In the case of mobile telephony, a distinction is made between onnetwork, off-network, fixed line, voice box and sms message calls. 55 Triple and double tariff packages 31

32 local calls, to mobile phones, national long-distance and international longdistance calls, with a cost calculated at the current price per minute in the tariff plans that have the highest proportion of subscribed users. For the purpose of the CPI, a weighted geometric mean is calculated with the participation of the companies that make up the sample. The most frequent usage of minutes for each one of the types of calls is determined for the standard bill. ii) Other telecommunication services. This subdivision includes telecommunications products that can be accessed from outside the home. Two products are monitored: - Public communications service: call centres. - Public internet service: Internet centres (cybercafé). In each case, a product is monitored collecting the price directly from a defined outlet Education services Education services are divided into five groups: pre-school and primary education; secondary education; post-secondary non-tertiary education; tertiary education; and education that can not be attributable to any specific level (for example, language courses and training courses). Education services for the first two groups are measured through a standard bill 56 that incorporates three items: (i) specific services covered by the enrolment fee, (ii) monthly tuition fees, and (iii) other charges such as an admission fee when applied by an outlet. The standard bill is priced according to each outlet, and the calculation to obtain the product incorporated in the index is made using a geometric mean. The basket of educational services adheres to the guidelines of international classification systems (COICOP and ISCED ). The price information for each of the items is obtained directly from the outlets that make up the sample, and is used to construct the standard bill for each outlet. In those cases where fees are charged in the UF unit of account, the figure is converted into Chilean pesos according to the exchange rate on day 15 of each month. Owing to the annual setting of tariff values the largest variations occur twice a year: enrolment fees are registered in January and monthly tuition fees and other charges in March For the other three groups only the enrolment and monthly tuition fees apply. The International Standard Classification of Education (ISCED) is a universal system used to compare educational programmes between countries. 32

33 Miscellaneous goods and services Two groups from this division have required special treatment: (i) insurance, and (ii) financial services. a) Insurance: Only car insurance is incorporated, with monthly monitoring of premiums through the collection of costs on day 15 of the month, and variations added using a geometric mean. b) Financial services: Direct expenses associated with financial products that do not depend on interest rates are measured. These include administration fees; charges for opening and maintaining a current account; operational expenses (such as mortgage loans); compulsory insurance; stamp duties and other operational fees. Prices (or rates) are collected monthly on day 15 of each month. The product Financial Costs is formed by the following: (a) commissions charged by banks and financial institutions (including charges for opening a current account, credit facilities, credit card operations, consumer credit, mortgage loans and stamp duties); and (b) commissions charged by department stores. Then, in order to incorporate these varieties, a weighted geometric mean is used according to the importance of each one of the companies in the industry that provides data. 8. Special cases: Treatment of missing prices In the price collection process, some prices may be missing or unavailable as a result of seasonal circumstances, supply shortages or the item has disappeared, which are circumstances that the price collector has no way of rectifying when collecting data. The procedure used for entering a value for a specific price of an item/outlet that is missing is known as price imputation. The treatment of missing prices takes place when: (a) a price is temporarily missing or is out of stock, (b) prices are missing due to seasonal or temporary circumstances and (c) when prices are free Treatment of missing prices when an item is out of stock INE implements a quality standard whereby the maximum number of price imputations in a given month during which the CPI is calculated, may not exceed 2% of prices collected for all varieties, except for seasonal and temporary products. 58 This does not include the products of university preparatory schools and training schools, which have a monthly price collection and standard bills denominated in the UF unit of account. 33

34 Price imputation is used as a last resort when all other efforts to fill in a missing observation have failed. Prices are imputed as follows: a) The missing price of an item from an outlet is imputed by entering the price variation taken from a similar outlet. b) If an item is not sufficiently represented, the price variation of similar items is used. c) If none of the above options is possible, this missing price is imputed by entering the price variation of similar products Treatment of seasonal and temporary prices Seasonal products 59 are those that are unavailable during certain seasons (months) of the year, or whose prices are strongly synchronised to the season and are traded on the market for around four months of the year 60. Divisions such as Food and non-alcoholic beverages and Clothing and footwear are subject to seasonal fluctuations. In the case of fruit and vegetables, values are constructed for two compound products (one seasonal and the other made up of fruit and vegetables available throughout the year). In periods in which a fruit or vegetable is unavailable, the price imputation takes place by using the variation of the remaining varieties, provided that the collected sample is representative. 61 If the sample is not representative, the last reported price is carried forward. The same procedure also applies to seasonal clothing The following table shows examples of seasonal products See ILO et al. (2006), page 16. It is possible that these can be found at a reduced number of establishments throughout the year, although given their low quantity they are not truly representative. Price registries are representative at a given time if their statistical distribution does not differ significantly from the intended, defined sample. 34

35 Table No. 5 Basket of seasonal products Product Item Basket s weight (%) Seasonal fruit Cherimoya (custard apple), plum, apricot, strawberry, cherry or morello cherry, kiwi, mango, melon, nectarine, melon pear, pineapple, grapefruit, watermelon, prickly pear and grape. 0.3 Seasonal vegetables Artichoke, beetroot, broccoli, cauliflower, sweet corn, asparagus, broad bean (fava bean), cucumber, green bean and shell bean. 0.4 Men outer garment (this is just an example) /a Autumn/winter men s sweater, spring/summer men's sweater, autumn/winter men s jacket, and spring/summer men s jacket. 0.4 Note: /a Women outer garments have a 0.3% weight, while in protective garments for boys, girls and babies, each products has a weight of 0.1%. Temporary products are those that are not universally (or generally) available all year long and whose consumption is clearly temporary, because of weather conditions or institutional circumstances 62. Price collection of such prices takes place at a defined period (with clear start and end), so an annual calendar is defined containing the month at which those prices must be collected. The following table shows temporary products. 62 When a law or tradition defines that a service is provided at a given time during the year. For example, the academic year for primary and secondary education- extends from March to December, but uniforms are only available at stores between January and March. 35

36 Table No. 6 Treatment of seasonal products Division Product Seasonality due to Weather conditions institutional Data taking Basket s weight (%) 3 Long boots and boots X April- September 0,1 3 School sports clothing (women-men) X January-March 0,1 3 Sandals(men-women) X November- March 0,01 3 School uniform (boysgirls) X January-March 0,1 5 Home air conditioner equipment X November- March 0,03 5 Electrical blankets X April-August 0,03 5 Heaters X April-August 0,1 9 Camping articles X December - March 0,04 9 School texts X January-March 0,1 9 Auxiliary school texts X January-March 0,03 10 Nursery school service X December - March 0,02 10 Kindergarten service X December - March 0,36 10 Educational services - elementary or primary school 1 st X December - 0,82 36

37 Division Product Seasonality due to Weather conditions institutional Data taking Basket s weight (%) 3 Long boots and boots X April- September 0,1 3 School sports clothing (women-men) X January-March 0,1 3 Sandals(men-women) X November- March 0,01 3 School uniform (boysgirls) cycle (1 st to 4 th grade) X January-March 0,1 March 10 Educational serviceselementary school, 2 nd cycle (5 th to 8 th grade) X December - March 0,83 10 Educational services - secondary education (1 st to 4 th grade) X December - March 0,87 10 College-bound programmes or preuniversity studies X December- March-July- August- September 0,04 10 Education services - technical education centres X December - March 0,20 10 Education service Professional institutes X December - March 0,36 10 Education service university studies X December - March 2,53 37

38 Division Product Seasonality due to Weather conditions institutional Data taking Basket s weight (%) 3 Long boots and boots X April- September 0,1 3 School sports clothing (women-men) X January-March 0,1 3 Sandals(men-women) X November- March 0,01 3 School uniform (boysgirls) X January-March 0,1 10 Training courses X 0,15 Note: Division 3: Clothing and footwear Division 5: Furnishings, household equipment and routine household maintenance Division 9: Recreation and culture Division 10: Education The imputation method used for temporary products is to carry forward prices at months where no observations take place Goods or services provided on a free basis There are certain situations in which a company or outlet can offer its goods or services for free. We can distinguish two of such situations: a) When a private or public entity gives a product for free in a temporal manner and the State, by means of a transfer, subsidizes the price, the last price recorded is carried forward. b) When a private company or public entity delivers the product on a free basis, in which case it fall outside the scope of the CPI as it is a transfer and not a sale or purchase. When the product is longer provided in a free basis, it is incorporated to the CPI calculation according to the procedures established for entering a new variety. 38

39 8.2. Quality adjustments For quality adjustments, the overlap method 63 and the comparable replacement processes are used Techniques and criteria used to guarantee quality Quality regulations include the validation of the data within outlets, the absence of sampling errors due to typing and price analysis by means of longitudinal and transversal validation techniques Series splicing/linking The CPI of the Greater Santiago area with base December 2008=100 splices with previous CPIs in two forms: a) using the three simple rule: from March 1928 to December 1998 at general index level, maintaining the variation rates previously published, b) The index is computed again according to the division level, COICOP: for the period that runs from January 1999 to December In this case, the variation rate of the general index is maintained and the variation rates of the 12 divisions show up, according the classification of the CPI base December 2008=100, but the activity is lost, as it is impossible to compute the CPI variation by adding the divisions variations. In both cases, the information will be published on INE s website. 63 A price quotient from the former article and its replacement in a given period is computed. This quotient is considered an indicator of changes in quality; this value is also applied to the replacement product when computing the price variation in the respective month. This method assumes that the difference in quality at any period is equivalent to the price difference Otros métodos disponibles son el de imputación de la media global (o imputación dirigida de la media), imputación de la media de la clase, encadenamiento para mostrar una variación de precios nula y el arrastre al período siguiente. See ILO et al. (2006), pages 208 and 260, paragraphs and

40 11. Basket CONSUMER PRICE INDEX (IPC) Base December 2009=100 Structure D G C SC P WEIGHT (%) DIVISION FOOD AND NON-ALCOHOLIC BEVERAGES 18,90136 GROUP FOOD 16,53676 CLASS BREAD AND CEREALS 3,95223 SUBCLASS RICE IN ALL FORMS 0,20027 PRODUCT RICE 0,20027 SUBCLASS FLOUR AND CEREALS 0,30835 PRODUCT FLOUR 0,11969 PRODUCT CEREALS 0,18866 SUBCLASS BREAD AND OTHER BAKERY PRODUCTS 3,16209 PRODUCT BREAD 2,18727 PRODUCT BISCUITS 0,36868 PRODUCT BAKERY PRODUCTS 0,56223 PRODUCT PREPARED MIXED AND DOUGHS 0,04391 SUBCLASS PASTA PRODUCTS IN ALL FORMS 0,28152 PRODUCT PASTA 0,28152 CLASS MEAT 4,

41 Structure D G C SC P WEIGHT (%) SUBCLASS BOVINE MEAT FRESH, CHILLED OR FROZEN 1,88889 PRODUCT BOVINE MEAT 1,88889 SUBCLASS SWINE MEAT FRESH, CHILLED OR FROZEN 0,34459 PRODUCT SWINE MEAT 0,34459 SUBCLASS POULTRY FRESH, CHILLED OR FROZEN 0,96539 PRODUCT TURKEY POULTRY 0,07357 PRODUCT CHICKEN POULTRY 0,89182 SUBCLASS PROCESSED MEAT 0,93053 PRODUCT CURED MEAT 0,59884 PRODUCT SAUSAGES 0,28930 PRODUCT BURGERS 0,04239 SUBCLASS CARNE DE OTROS ANIMALES FRESCA, REFRIGERADAO CONGELADA 0,03374 PRODUCT CARNE DE CORDERO CLASS FISH AND SEAFOOD 0,48768 SUBCLASS FISH FRESH, CHILLED OR FROZEN 0,22814 PRODUCT FISH 0,22814 SUBCLASS SEAFOOD FRESH, CHILLED OR FROZEN 0,

42 Structure D G C SC P WEIGHT (%) PRODUCT SEAFOOD 0,08607 SUBCLASS CANNED FISH AND SEAFOOD 0,17347 PRODUCT CANNED FISH 0,14881 PRODUCT CANNED SEAFOOD 0,02466 CLASS MILK, CHEESE AND EGGS 2,25973 SUBCLASS MILK ALL KINDS 0,89147 PRODUCT POWDERED MILK 0,29336 PRODUCT RAW MILK 0,52840 PRODUCT PASTEURIZED MILK 0,06971 SUBCLASS YOGHURT AND MILK-BASED DESSERTS 0,43599 PRODUCT YOGHURT 0,36246 PRODUCT MILK-BASED DESSERTS 0,07353 SUBCLASS CHEESE ALL KINDS 0,61933 PRODUCT CHEESE 0,61933 SUBCLASS EGGS 0,31294 PRODUCT EGGS 0,31294 CLASS OILS AND FATS 0,53312 SUBCLASS BUTTER AND MARGARINE 0,

43 Structure D G C SC P WEIGHT (%) PRODUCT BUTTER 0,09454 PRODUCT MARGARINE 0,14230 SUBCLASS EDIBLE OILS 0,29628 PRODUCT VEGETABLE OILS 0,29628 CLASS FRUIT 0,85050 SUBCLASS FRESH, CHILLED OR FROZEN FRUIT 0, PRODUCT APPLE 0,11564 PRODUCT ORANGE 0,10900 PRODUCT PEAR 0,02996 PRODUCT BANANA 0,12944 PRODUCT SEASONAL FRUITS 0,34135 SUBCLASS DRIED AND CANNED FRUIT 0,12511 PRODUCT DRIED FRUIT 0,06849 PRODUCT CANNED FRUIT 0,05662 CLASS VEGETABLES 2,65360 SUBCLASS FRESH, CHILLED AND FROZEN VEGETABLES 1,88819 PRODUCT CHARD AND SPINACH 0,04332 PRODUCT CELERY 0,

44 Structure D G C SC P WEIGHT (%) PRODUCT ONIONS AND CHIVES 0,17879 PRODUCT LETTUCE 0,16119 PRODUCT LEMON 0,08700 PRODUCT AVOCADO 0,24509 PRODUCT PIMENTO AND PEPPER 0,04145 PRODUCT CABBAGE 0,03388 PRODUCT TOMATO 0,31687 PRODUCT CARROT 0,08008 PRODUCT PUMPKIN 0,09068 PRODUCT ITALIAN SQUASH 0,03258 PRODUCT SEASONAL VEGETABLES 0,37903 PRODUCT FROZEN VEGETABLES 0,07314 PRODUCT CANNED VEGETABLES 0,02486 PRODUCT PICKLED VEGETABLES 0,07612 SUBCLASS DRIED VEGETABLES 0,10841 PRODUCT VEGETABLES 0,10841 SUBCLASS TUBER VEGETABLES AND Y PRODUCTS DERIVADOS 0,65700 PRODUCT POTATOES 0,

45 Structure D G C SC P WEIGHT (%) PRODUCT POTATOES, FROZEN AND DEHYDRATED 0,02935 PRODUCT POTATOES CHIPS 0,16815 CLASS SUGAR, JAM, HONEY, CHOCOLATE AND SWEET SPREADS 1,09222 SUBCLASS SUGAR AND SWEETENER 0,25195 PRODUCT SUGAR 0,25195 SUBCLASS JAM, MANJAR (MILK CANDY) AND OTHER SWEET SPREADS 0,14549 PRODUCT JAM 0,07010 PRODUCT MANJAR (MILK CANDY) AND SWEET SPREADS OTHER 0,07539 SUBCLASS CANDY, CHOCOLATE AND OTHER CONFECTIONERY PRODUCTS 0,34275 PRODUCT CANDY AND CHEWING GUM 0,12925 PRODUCT CHOCOLATE 0,21350 SUBCLASS ICE CREAM ALL KINDS 0,35203 PRODUCT ICE CREAM 0,35203 CLASS OTHER FOOD PRODUCTS 0,54454 SUBCLASS SALT, CULINARY HERBS, SPICES AND CONDIMENTS 0,13506 PRODUCT SALT 0,02541 PRODUCT HERBS, SPICES AND CONDIMENTS 0,

46 Structure D G C SC P WEIGHT (%) SUBCLASS SAUCES AND DRESSINGS 0,23751 PRODUCT SAUCES 0,10034 PRODUCT DRESSINGS 0,13717 SUBCLASS SOUPS AND BROTHS, BABY FOOD AND NON- DAIRY DESSERTS 0,17197 PRODUCT SOUPS AND BROTHS 0,05032 PRODUCT BABY FOOD 0,08315 PRODUCT NON-DAIRY DESSERTS 0,03850 GROUP NON-ALCOHOLIC BEVERAGES 2,36460 CLASS COFFEE, TEA AND COCOA 0,35496 SUBCLASS COFFEE AND SUBSTITUTES 0,14829 PRODUCT COFFEE 0,14829 SUBCLASS TEA AND OTHER PLANT PRODUCTS FOR INFUSIONS 0,15966 PRODUCT TEA 0,15966 SUBCLASS COCOA AND CHOCOLATE-BASED POWDER 0,04701 PRODUCT FLAVOUR FOR MILK PRODUCTS 0,04701 CLASS MINERAL WATERS, REFRESHMENTS, SOFT DRINKS, FRUIT JUICE 2,00964 SUBCLASS MINERAL WATER AND PURIFIED WATER 0,

47 Structure D G C SC P WEIGHT (%) PRODUCT BOTTLED WATER 0,12198 SUBCLASS SOFT DRINKS 1,48105 PRODUCT SOFT DRINKS 1,48105 SUBCLASS LIQUID JUICES AND JUICE POWDER 0,40661 PRODUCT LIQUID JUICES 0,28116 PRODUCT JUICE POWDER 0,12545 Structure D G C SC P Ponderación (%) DIVISION ALCOHOLIC BEVERAGES AND TOBACCO 2,00105 GROUP ALCOHOLIC BEVERAGES 1,04735 CLASS SPIRITS 0,31756 SUBCLASS LICOURS AND OTHER DISTILLATES 0,31756 PRODUCT PISCO 0,14709 PRODUCT RON 0,11940 PRODUCT WHISKEY 0,05107 CLASS WINES 0,37167 SUBCLASS WINES,ALL KINDS 0,

48 Structure D G C SC P Ponderación (%) PRODUCT WHITE WINE 0,05662 PRODUCT RED WINE 0,29004 PRODUCT SPARKLING WINE 0,02501 CLASS BEER 0,35812 SUBCLASS BEERS ALL KINDS 0,35812 PRODUCT BEER 0,35812 GROUP TOBACCO 0,95370 CLASS TOBACCO 0,95370 SUBCLASS CIGARETTES ALL KINDS 0,95370 PRODUCT CIGARETTES 0,95370 Structure D G C SC P WEIGHT (%) DIVISION CLOTHING AND FOOTWEAR 5,21042 GROUP CLOTHING 2,72778 CLASS CLOTHING MATERIALS 0,04171 SUBCLASS GARMENTS FABRICS 0,04171 PRODUCT GARMENTS FABRICS 0,

49 Structure D G C SC P WEIGHT (%) CLASS CLOTHING 3,45492 SUBCLASS MEN CLOTHING 1,06805 PRODUCT MEN COATS 0,40102 PRODUCT MEN TROUSERS AND SHORTS 0,27680 PRODUCT MEN SHIRTS AND T-SHIRTS 0,19224 PRODUCT MEN SUIT 0,04074 PRODUCT SPORTSWEAR FOR MEN 0,04717 PRODUCT MEN UNDERWEAR AND SLEEPWEAR 0,11008 SUBCLASS CLOTHING FOR WOMEN 1,5277 PRODUCT WOMEN COATS 0,38224 PRODUCT SKIRTS, WOMEN TROUSERS 0,41255 PRODUCT WOMAN BLOUSES AND T-SHIRTS 0,28870 PRODUCT WOMEN SUIT 0,08918 PRODUCT SPORTSWEAR FOR WOMEN 0,07208 PRODUCT WOMEN UNDERWEAR AND SLEEP WEAR 0,28296 SUBCLASS CHILDREN (3 TO 13 YEARS) CLOTHING 0,61249 PRODUCT OUTER COATS FOR BOYS 0,

50 Structure D G C SC P WEIGHT (%) PRODUCT OUTER COATS FOR GIRLS 0,06208 PRODUCT TROUSERS AND SHORTS FOR BOYS 0,07136 PRODUCT PANTS, SKIRTS, SHORTS FOR GIRLS 0,06506 PRODUCT BOYS T-SHIRTS 0,05328 PRODUCT GIRLS T-SHIRTS 0,04321 PRODUCT GIRL DRESSES 0,03904 PRODUCT BOYS SPORTSWEAR 0,04710 PRODUCT GIRLS SPORTSWEAR 0,03708 PRODUCT BOYS UNDERWEAR AND SLEEPWEAR 0,04844 PRODUCT GIRLS UNDERWEAR AND SLEEPWEAR 0,05193 SUBCLASS GARMENTS FOR INFANTS (FROM 0 TO 2 YEARS) 0,08520 PRODUCT INFANT OUTER COAT 0,02145 PRODUCT INFANT ENSEMBLE 0,0470 PRODUCT INFANT UNDERWEAR AND SLEEPWEAR 0,02305 SUBCLASS SCHOOL ATTIRE 0,16147 PRODUCT GIRLS SCHOOL UNIFORMS 0,06956 PRODUCT BOYS SCHOOL UNIFORMS 0,

51 Structure D G C SC P WEIGHT (%) PRODUCT SCHOOL SPORTSWEAR 0,02701 CLASS OTHER GARMENTS AND ACCESSORIES 0,15290 SUBCLASS OTHER GARMENTS AND ACCESSORIES 0,15290 PRODUCT GARMENTS REPAIR 0,05260 PRODUCT CLOTHING ACCESSORIES 0,10030 CLASS GARMENTS CLEANING AND REPAIRING SERVICES 0,07825 SUBCLASS GARMENTS CLEANING AND REPAIRING SERVICES 0,07825 PRODUCT CLEANING SERVICE 0,03188 PRODUCT GARMENTS REPAIR SERVICE 0,04637 GROUP FOOTWEAR 1,48264 CLASS SHOES AND OTHER FOOTWEAR 1,45518 SUBCLASS FOOTWEAR FOR MEN 0,36246 PRODUCT SNICKERS FOR MEN 0,13821 PRODUCT SHOES FOR MEN 0,19511 PRODUCT CALZADO DE ESTACION PARA HOMBRE 0,02914 SUBCLASS FOOTWEAR FOR WOMEN 0,60654 PRODUCT ZAPATILLAS PARA MUJER 0,

52 Structure D G C SC P WEIGHT (%) PRODUCT ZAPATOS PARA MUJER 0,60654 PRODUCT CALZADO DE ESTACION PARA MUJER 0,22363 SUBCLASS FOOTWEAR FOR CHILDREN (3 TO 13 YEARS) PRODUCT CHILDREN'S FOOTWEAR 0,06763 PRODUCT GIRLS FOOTWEAR 0,06736 PRODUCT SPORT SHOES FOR BOYS 0,25081 PRODUCT SPORT SHOES FOR GIRLS 0,10038 CLASS FOOTWEAR REPAIR 0,02746 SUBCLASS FOOTWEAR REPAIR SERVICES PRODUCT FOOTWEAR REPAIR SERVICES 0,02746 Structure D G C SC P WEIGHT (%) DIVISION HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 13,26656 GROUP HOUSING RENTALS 3,87235 CLASS HOUSING RENTALS 3,87235 SUBCLASS HOUSING RENTAL 3,87235 PRODUCT RENTAL 3,

53 Structure D G C SC P WEIGHT (%) GROUP MAINTENANCE AND REPAIR OF THE DWELLING 1,88203 CLASS MATERIALS FOR MAINTENANCE AND REPAIR OF THE DWELLING 0,31150 SUBCLASS MATERIALS FOR MAINTENANCE AND REPAIR OF THE DWELLING 0,31150 PRODUCT VARIOUS MATERIALS FOR THE REPAIR OF THE DWELLING 0,02113 PRODUCT PAINTS AND VARNISHES 0,16310 PRODUCT PLUMBING ITEMS (PIPES, TAPS, JOINTS, AND SO ON) 0,09169 PRODUCT SEALANTS AND ADHESIVES 00,03558 CLASS SERVICES FOR MAINTENANCE AND REPAIR OF THE DWELLING 1,57053 SUBCLASS SERVICES FOR MAINTENANCE AND REPAIR OF THE DWELLING 1,57053 PRODUCT SERVICE MAINTENANCE AND REPAIR OF THE DWELLING 1,57053 GROUP WATER SUPPLY AND MISCELLANEOUS SERVICES RELATING TO THE DWELLING 2,33585 CLASS WATER SUPPLY 1,88254 SUBCLASS WATER AND SEWAGE SUPPLY 1,88254 PRODUCT DRINKING WATER 1,88254 CLASS GARBAGE COLLECTION 0,21977 SUBCLASS GARBAGE COLLECTION SERVICE 0,

54 Structure D G C SC P WEIGHT (%) PRODUCT GARBAGE COLLECTION SERVICE 0,21977 CLASS OTHER HOUSING RELATED SERVICES 0,23354 SUBCLASS OTHER HOUSING RELATED SERVICES 0,23354 PRODUCT HOME SECURITY ALARMS 0,23354 GROUP ELECTRICITY, GAS AND OTHER FUELS 5,17633 CLASS ELECTRICITY 2,73565 SUBCLASS ELECTRICITY 2,73565 PRODUCT ELECTRICITY 2,73565 CLASS GAS 2,09275 SUBCLASS NETWORK GAS 0,89884 PRODUCT NETWORK GAS 0,89884 SUBCLASS LIQUIFIED GAS 1,19391 PRODUCT LIQUIFIED GAS 1,19391 CLASS OTHER HOUSEHOLD FUELS 0,34793 SUBCLASS OTHER HOUSEHOLD FUELS 0,34793 PRODUCT COAL 0,12047 PRODUCT KEROSENE 0,17927 PRODUCT LEÑA 0,

55 Structure D G C SC P WEIGHT (%) DIVISION FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTINE HOUSEHOLD MAINTENANCE 7,51615 GROUP FURNITURE AND ACCESSORIES, CARPETS AND OTHER FLOOR COVERINGS 1,77577 CLASS FURNITURE AND HOME EQUIPMENT 1,71645 SUBCLASS FURNITURE AND FURNISHING ARTICLES 1,43645 PRODUCT BED 0,5098 PRODUCT MATTRESS 0,08926 PRODUCT COT 0,02626 PRODUCT DESK 0,03555 PRODUCT DINING FURNITURE 0,24702 PRODUCT KITCHEN FURNITURE 0,05103 PRODUCT MODULAR FURNITURE AND RACKS TV 0,17161 PRODUCT SOFA AND CHAIR 0,30592 SUBCLASS ORNAMENTAL ARTICLES 0,28000 PRODUCT RUGS 0,07150 PRODUCT LAMPS 0,04252 PRODUCT ORNAMENTAL ARTICLES 0,16598 CLASS REPAIR OF FURNITURE, ACCESSORIES AND 0,

56 Structure D G C SC P WEIGHT (%) FLOOR COVERINGS SUBCLASS REPAIR SERVICES - FURNITURE, ACCESSORIES AND FLOOR COVERINGS 0,05932 PRODUCT FURNITURE REPAIR SERVICE 0,03825 PRODUCT CARPET CLEANING SERVICE 0,02107 GROUP HOUSEHOLD TEXTILES 0,32485 CLASS HOUSEHOLD TEXTILES 0,32458 SUBCLASS HOUSEHOLD TEXTILES 0,32458 PRODUCT BEDLINEN 0,15878 PRODUCT BATHROOM AND KITCHEN LINEN 0,09001 PRODUCT LIVING AND DINING ROOM LINEN 0,07606 GROUP HOUSEHOLD APPLIANCES 1,38448 CLASS MAJOR HOUSEHOLD APPLIANCES WHETHER ELECTRIC OR NOT 1,10376 SUBCLASS KITCHEN APPLIANCES 1,10376 PRODUCT VACUUM 0,03296 PRODUCT WATER HEATERS 0,05104 PRODUCT COCINA 0,14902 PRODUCT ARTICULOSO PARA LA CLIMATIZACIÓN DEL HOGAR 0,14270 PRODUCT MICROWAVE OVEN 0,

57 Structure D G C SC P WEIGHT (%) PRODUCT WASHING MACHINE 0,36045 PRODUCT REFRIGERATOR 0,29876 CLASS SMALL HOUSEHOLD APPLIANCES 0,22774 SUBCLASS APPLIANCES AND OTHER ACCESSORIES 0,22774 PRODUCT SMALL KITCHEN APPLIANCES 0,07814 PRODUCT IRON 0,06954 PRODUCT FOOD PROCESSOR 0,8006 CLASS REPAIR OF HOUSEHOLD APPLIANCES 0,05298 SUBCLASS REPAIR SERVICES OF KITCHEN APPLIANCES 0,05298 PRODUCT REPAIR SERVICES OF KITCHEN APPLIANCES 0,05298 GROUP GLASSWARE, TABLEWARE AND HOUSEHOLD UTENSILS 0,27669 CLASS GLASSWARE, TABLEWARE AND HOUSEHOLD UTENSILS 0,27669 SUBCLASS HOUSEHOLD UTENSILS 0,02513 PRODUCT CUTLERY 0,09649 PRODUCT TABLEWARE 0,04524 PRODUCT GLASSEWARE 0,

58 PRODUCT SAUCEPAN 0,04190 PRODUCT KITCHEN UTENSILS 0,06793 GROUP HOUSEHOLD AND GARDEN TOOLS AND EQUIPMENT 0,37333 CLASS TOOLS AND ACCESSORIES 0,37333 SUBCLASS TOOLS 0,09996 PRODUCT ELECTRIC TOOLS 0,06664 PRODUCT HAND TOOLS 0,03332 SUBCLASS ACCESSORIES 0,27337 PRODUCT LIGHTING ACCESSORIES 0,05829 PRODUCT LOCKS 0,08897 PRODUCT POOL AND GARDEN ACCESSORIES 0,02039 PRODUCT ELECTRIC ACCESSORIES 0,04901 PRODUCT BATTERIES 0,05671 GROUP GOODS AND SERVICES FOR ROUTINE HOUSEHOLD MAINTENANCE 3,38103 CLASS NON-DURABLE HOUSEHOLD GOODS 1,12471 SUBCLASS PRODUCTS FOR HOUSEHOLD CLEANING AND MAINTENENCE 0,84852 PRODUCT AMBIENT AROMATIZER DISINFECTANTS 0,09567 PRODUCT WASHING POWDER 0,

59 PRODUCT DISHWASHING PODWER 0,07845 PRODUCT FLOOR CLEANERS 0,06131 PRODUCT MULTI-PURPOSE CLEANERS 0,10614 PRODUCT BLEACHES AND SOFTENERS 0,08060 SUBCLASS ARTICLES FOR HOUSEHOLD CLEANING AND MAINTENANCE 0,27619 PRODUCT FLOOR CLEANING EQUIPMENT 0,08199 PRODUCT MATCHES 0,03373 PRODUCT ARTICLES FOR CLEANING OF BATHROOM AND KITCHEN 0,05768 PRODUCT TABLE NAPKIN AND PAPER TOWEL 0,10279 CLASS HOUSEHOLD DOMESTIC SERVICES 2,25632 SUBCLASS DOMESTIC SERVICES 2,25632 PRODUCT DOMESTIC SERVICES 2,25632 Structure D G C SC P WEIGHT (%) 59

60 Structure D G C SC P WEIGHT (%) DIVISION HEALTH 5,37554 GROUP MEDICAL PRODUCTS, APPLIANCES AND EQUIPMENT 2,32627 CLASS PHARMACEUTICAL PRODUCTS 1,78975 SUBCLASS MEDICINES 1,78975 PRODUCT ANALGESIC AND NSAID 0,24836 PRODUCT ANTACID AND ANTULCER MEDICINES 0,05320 PRODUCT ANTIALLERGIC MEDICINES 0,07136 PRODUCT ANTIBIOTICS 0,13793 PRODUCT ORAL CONTRACEPTIVES 0,17573 PRODUCT ANTICONVULSANT AND ANTIEPILEPTIC 0,06164 PRODUCT ANTIDIABÉTIC MEDICINES 0,03818 PRODUCT ANTISPASMODICS 0,03785 PRODUCT ANTIFUNGAL DRUG 0,05718 PRODUCT ANTI-FLU 0,06154 PRODUCT ANTIHYPERTENSIVE 0,10875 PRODUCT ANTISEPTIC AND DISINFECTANT SUBSTANCES 0,03224 PRODUCT DERMATOLOGICAL MEDICINES 0,04074 PRODUCT ANTIDEPRESSANTS AND ANXIOLYTIC 0,

61 Structure D G C SC P WEIGHT (%) PRODUCT HIPOLIPIDEMIANT 0,05075 PRODUCT APPETITE SUPPRESSANTS AND ANTIOBESITY 0,04596 PRODUCT HOMEOPATHIC MEDICINES AND NATURAL PRODUCTS 0,04925 PRODUCT MEDICATIONS FOR ERECTILE DYSFUNCTION 0,04556 PRODUCT MUCOLYTIC AND BRONCHODILATORS 0,12007 PRODUCT EYE DROPS 0,06265 PRODUCT VITAMINS AND MINERALS 0,11201 CLASS OTHER MEDICAL PRODUCTS 0,04288 SUBCLASS OTHER MEDICAL PRODUCTS 0,04288 PRODUCT PLASTERS, DRESSINGS AND BANDAGES 0,02238 PRODUCT CONDOMS 0,02050 CLASS THERAPEUTIC APPLIANCES AND EQUIPMENT 0,49364 SUBCLASS THERAPEUTIC APPLIANCES AND EQUIPMENT 0,49364 PRODUCT CORRECTIVE LENSES 0,45228 PRODUCT EQUIPMENT FOR MEASURING HEALTH PARAMETERS 0,04136 GROUP OUTPATIENT SERVICES 2,11120 CLASS MEDICAL SERVICES 0,

62 Structure D G C SC P WEIGHT (%) SUBCLASS MEDICAL SERVICES 0,79831 PRODUCT MEDICAL APPOINTMENTS 0,3299 PRODUCT PROCEDURES AND SURGERIES FOR OUTPATIENTS 0,06532 CLASS DENTAL SERVICES 0,66803 SUBCLASS DENTAL SERVICES 0,66803 PRODUCT DENTAL APPOINTMENT 0,42258 PRODUCT DENTAL TREATMENT 0,24545 CLASS PARAMEDICAL SERVICES 0,64486 SUBCLASS MEDICAL ANALYSIS LABS, DIAGNOSIS AND RADIOLOGY SERVICES 0,44020 PRODUCT RADIOLOGY EXAMS 0,25643 PRODUCT MEDICAL ANALYSIS LABS EXAMS 0,18377 SUBCLASS SERVICES BY OTHER HEALTH PROFESSIONALS 0,17557 PRODUCT SERVICES BY OTHER HEALTH PROFESSIONALS 0,17557 SUBCLASS AMBULANCE SERVICES 0,02909 PRODUCT EMERGENCY MOBILE SERVICE 0,02909 GROUP HOSPITAL SERVICES 0,93807 CLASS HOSPITAL SERVICES 0,

63 Structure D G C SC P WEIGHT (%) SUBCLASS HOSPITAL SERVICES 0,56478 PRODUCT COMPREHENSIVE HOSPITAL SERVICE 0,56478 SUBCLASS MEDICAL AND PARAMEDICAL SERVICES 0,37329 PRODUCT MEDICAL SURGERIES AND HOSPITAL PROCEDURES 0,37329 Structure D G C SC P WEIGHT (%) DIVISION TRANSPORT 19,28740 GROUP PURCHASE OF VEHICLES 8,86906 CLASS MOTOR CARS 8,86906 SUBCLASS NEW CAR 5,87231 PRODUCT NEW CAR 5,87231 SUBCLASS PREVIOUSLY USED CAR 2,82519 PRODUCT USED CAR 2,82519 CLASS MOTORCYCLES 0,10987 SUBCLASS MOTORCYCLES 0,10987 PRODUCT MOTORCYCLES 0,10987 CLASS BICYCLES 0,

64 Structure D G C SC P WEIGHT (%) SUBCLASS BICYCLES 0,06169 PRODUCT BICYCLES 0,06169 GROUP OPERATION OF PERSONAL TRANSPORT EQUIPMENT 4,79461 CLASS SPARE PARTS AND ACCESSORIES FOR PERSONAL TRANSPORT EQUIPMENT 0,21641 SUBCLASS VEHICLE SPARE PARTS 0,21641 PRODUCT VEHICLE ELECTRIC SPARES 0,09893 PRODUCT TIRES AND WHEELS 0,0,04859 PRODUCT ACCESSORIES FOR SAFETY AND CAR CARE 0,06889 CLASS FUELS AND LUBRICANTS FOR PERSONAL TRANSPORT EQUIPMENT 3,50984 SUBCLASS VEHICLE FUELS 3,43249 PRODUCT GASOLINE 3,22798 PRODUCT DIESEL OIL 0,20451 SUBCLASS LUBRICANTS AND OILS FOR THE CAR 0,07735 PRODUCT LUBRICANTS AND OILS FOR THE CAR 0,07735 CLASS MAINTENANCE AND REPAIR OF PERSONAL TRANSPORT EQUIPMENT 0,58612 SUBCLASS MAINTENANCE AND REPAIR SERVICES OF USED CARS 0,58612 PRODUCT MAINTENANCE SERVICE OF NEW CARS 0,

65 Structure D G C SC P WEIGHT (%) PRODUCT CAR WASH SERVICE 0,03657 PRODUCT CAR REPAIR SERVICE 0,28270 CLASS OTHER MAINTENANCE AND REPAIR SERVICES OF PERSONAL TRANSPORT EQUIPMENT 0,48224 SUBCLASS RENTAL FOR VEHICLE PARKING 0,14462 PRODUCT PARKING RENTAL SERVICE 0,14462 SUBCLASS OTHER SERVICES IN RESPECT WITH VEHICLES 0,33762 PRODUCT TOLL AND AUTOMATIC TOLL SERVICES 0,26146 PRODUCT DRIVERS LICENCES 0,03263 PRODUCT ROADWORTHINESS TESTS 0,04353 GROUP TRANSPORT SERVICES CLASS PASSENGER TRANSPORT BY RAILWAY 0,04107 SUBCLASS PASSENGER TRANSPORT SERVICES BY RAILWAY 0,04107 PRODUCT INTERCITY RAILWAY TRANSPORT SERVICE 0,02237 PRODUCT SERVICIOS DE TRANSPORTE TREN URBANO 0,01870 CLASS PASSENGER TRANSPORT BY URBAN AND ROADS 3,11761 SUBCLASS PASSENGER TRANSPORT SERVICES BY URBAN ROADS 2,36082 PRODUCT SHARED CAB SERVICES 0,

66 Structure D G C SC P WEIGHT (%) PRODUCT TAXI TRANSPORTATION SERVICE 0,38158 PRODUCT SCHOOL BUS SERVICE 0,19715 SUBCLASS PASSENGER TRANSPORT SERVICES BY ROAD 0,93605 PRODUCT INTERURBAN BUS SERVICE 0,75679 CLASS AIR PASSENGER TRANSPORT SERVICES 0,49248 SUBCLASS AIR PASSENGER TRANSPORT SERVICES 0,49248 PRODUCT AIR TRANSPORT SERVICE 0,49248 CLASS COMBINED PASSENGERS TRANSPORT 1,97257 SUBCLASS COMBINED PASSENGERS TRANSPORT SERVICES 1,97257 PRODUCT MULTIMODE TRANSPORT SERVICE 1,97257 Structure D G C SC P WEIGHT (%) DIVISION COMMUNICATIONS 4,73727 GROUP POSTAL SERVICES 0,02861 CLASS POSTAL SERVICES 0,02861 SUBCLASS POSTAL SERVICES 0,02861 PRODUCT POSTAL SERVICES 0,

67 GROUP TELEPHONE EQUIPMENT 0,39722 CLASS TELEPHONE EQUIPMENT 0,39722 SUBCLASS TELEPHONE EQUIPMENT 0,39722 PRODUCT MOBILE EQUIPMENT 0,39722 GROUP TELEPHONE SERVICES 4,31144 CLASS TELEPHONE SERVICES 4,19544 SUBCLASS RESIDENTIAL SERVICES TELECOMMUNICATIONS 4,19544 PRODUCT RESIDENTIAL INTERNET CONNECTION 0,05091 PRODUCT TELECOMMUNICATIONS SERVICE PACK 1,23700 PRODUCT MOBILE TELEPHONE SERVICE 2,09136 PRODUCT RESIDENTIAL TELEPHONE SERVICE 0,81617 SUBCLASS OTHER TELECOMMUNICATION SERVICES 0,11600 PRODUCT PUBLIC COMMUNICATION SERVICES 0,06262 PRODUCT PUBLIC INTERNET SERVICE 0,05338 Structure D G C SC P WEIGHT (%) DIVISION RECREATION AND CULTURE 7,45155 GROUP AUDIO-VISUAL EQUIPMENT, PHOTOGRAPHIC AND INFORMATION PROCESSING EQUIPEMENT 3,

68 Structure D G C SC P WEIGHT (%) CLASS EQUIPMENT FOR THE RECEPTION, RECORDING AND REPRODUCTION OF SOUNDS AND PICTURES 1,18924 SUBCLASS TELEVISION AND FILM PLAYERS 0,81094 PRODUCT TELEVISION SETS 0,66074 PRODUCT MULTIMEDIA PLAYER 0,15020 SUBCLASS AUDIO EQUIPMENT 0,37830 PRODUCT SOUND EQUIPMENT 0,20128 PRODUCT PORTABLE AUDIO AND VIDEO PLAYER 0,17702 CLASS PHOTOGRAPHIC AND CINEMATOGRAPHIC EQUIPMENT AND OPTICAL INSTRUMENTS 0,22840 SUBCLASS CAMERAS 0,22840 PRODUCT VIDEO CAMERA 0,04747 PRODUCT PHOTOGRAPHIC CAMERA 0,18093 CLASS INFORMATION PROCESSING EQUIPMENT 1,47140 SUBCLASS COMPUTERS, PRINTERS AND ACCESSORIES 1,47140 PRODUCT COMPUTER 1,34006 PRODUCT PRINTER 0,05134 PRODUCT COMPUTER ACCESSORIES 0,08000 CLASS RECORDING MEDIA 0,

69 Structure D G C SC P WEIGHT (%) SUBCLASS RECORDING OF SOUNDS AND IMAGES 0,21533 PRODUCT DIGITAL MUSIC AND FILM 0,13393 PRODUCT MAGNETIC SUPPORT UNIT 0,08140 GROUP OTHER EQUIPMENT AND ITEMS FOR RECREATION, FLOWERS, GARDENING AND PETS 1,34604 CLASS GAMES, TOYS AND HOBBIES 0,42191 SUBCLASS TOYS AND GAMES 0,42191 PRODUCT TOY CARS 0,08215 PRODUCT ACTION FIGURES 0,07832 PRODUCT ROOM GAMES 0,02562 PRODUCT EDUCATIONAL TOYS 0,03907 PRODUCT VIDEO GAME CONSOLES 0,07909 PRODUCT DOLLS AND PUPPETS 0,08703 PRODUCT CARRIAGES FOR CHILDREN 0,03063 CLASS SPORTS EQUIPMENT AND CAMPING AND OPEN AIR RECREATION 0,20775 SUBCLASS SPORTS EQUIPMENT, CAMPING AND RECREATION 0,20775 PRODUCT SPORTS EQUIPMENT 0,08818 PRODUCT CAMPING EQUIPMENT 0,

70 Structure D G C SC P WEIGHT (%) PRODUCT MUSICAL INSTRUMENTS 0,03958 PRODUCT EXERCISE MACHINES 0,02845 CLASS GARDENING AND FLOWERS 0,17009 SUBCLASS FLOWERS AND PLANTS 0,17009 PRODUCT FLOWERS 0,10995 PRODUCT PLANTS 0,06014 CLASS PETS AND RELATED PRODUCTS 0,45877 SUBCLASS PET FOOD AND ACCESSORIES 0,45877 PRODUCT PET FOOD 0,41876 PRODUCT PET ACCESSORIES 0,04001 CLASS VETERINARY SERVICES 0,08752 SUBCLASS VETERINARY SERVICES AND OTHER SERVICES FOR PETS 0,08752 PRODUCT VETERINARY SERVICE 0,08752 GROUP RECREATION AND CULTURAL SERVICES 1,28730 CLASS RECREATIONAL AND SPORTING SERVICES 0,73183 SUBCLASS SERVICES PROVIDED BY ESTABLISHMENTS OF RECREATION AND SPORTS 0,62168 PRODUCT CENTERS FOR RECREATIONAL SERVICES 0,

71 Structure D G C SC P WEIGHT (%) PRODUCT SPORTS TICKETS 0,03055 PRODUCT DISCOTHEQUE ENTRY TICKETS 0,13161 PRODUCT BIRTHDAY PARTY SERVICE 0,06729 SUBCLASS CLASSS SPORTS AND RECREATION 0,11015 PRODUCT SPORT CLASSES 0,02734 PRODUCT RECREATIONAL CLASSES 0,08281 CLASS CULTURAL SERVICES 0,42940 SUBCLASS SERVICES PROVIDED BY CULTURAL ESTABLISHMENTS 0,17686 PRODUCT CINEMA TICKETS 0,09486 PRODUCT THEATER TICKETS 0,08200 SUBCLASS PHOTOGRAPHY SERVICES 0,05802 PRODUCT DIGITAL PHOTO SERVICE 0,05802 SUBCLASS TELEVISION SERVICES 0,19452 PRODUCT RESIDENTIAL PAY TELEVISION SERVICES 0,19452 CLASS GAMBLING GAMES 0,12607 SUBCLASS GAMBLING GAMES 0,12607 PRODUCT GAMBLING GAMES

72 Structure D G C SC P WEIGHT (%) GROUP NEWSPAPERS, BOOKS AND OFFICE SUPPLIES 0,79682 CLASS BOOKS, DICTIONARIES, ENCYCLOPEDIAS AND OTHER SIMILAR 0,27873 SUBCLASS SCHOOL TEXTS 0,14734 PRODUCT SCHOOL TEXTS 0,11619 PRODUCT SUPPLEMENTARY SCHOOL TEXTS 0,03115 SUBCLASS NON-SCHOOL TEXTS 0,13139 PRODUCT BOOKS 0,13139 CLASS NEWSPAPERS AND MAGAZINES 0,13645 SUBCLASS NEWSPAPERS AND MAGAZINES 0,13645 PRODUCT NEWSPAPERS 0,11471 PRODUCT MAGAZINES AND NEWSPAPERS 0,02174 CLASS PAPER, STATIONERY AND DRAWING MATERIALS 0,38164 SUBCLASS SCHOOL SUPPLIES 0,30246 PRODUCT NOTEBOOKS 0,10983 PRODUCT PENCILS 0,06799 PRODUCT ART CLASS SUPPLIES MANUAL 0,12464 SUBCLASS DESK ARTICLES 0,07918 PRODUCT DESK ARTICLES 0,

73 Structure D G C SC P WEIGHT (%) GROUP PACKAGES HOLIDAYS 0,91702 CLASS HOLIDAYS PACKAGES 0,91702 SUBCLASS ALL INCLUSIVE TRAVEL SERVICES 0,91702 PRODUCT HOLIDAYS PACKAGES 0,91702 Structure D G C SC P WEIGHT (%) DIVISION EDUCATION 6,02274 GROUP PRE-SCHOOL EDUCATION AND ELEMENTARY EDUCATION 1,82201 CLASS PRE-SCHOOL EDUCATION AND ELEMENTARY EDUCATION 1,82201 SUBCLASS PRE-SCHOOL AND ELEMENTARY EDUCATION SERVICES 1,82201 PRODUCT NURSERY SCHOOL 0,01965 PRODUCT KINDERGARTEN SERVICE 0,32504 PRODUCT st CYCLE OF PRIMARY EDUCATION GRADE TO 4th) (1st 0,73423 PRODUCT nd CYCLE OF PRIMARY EDUCATION GRADE TO 8th) (5th 0,74309 GROUP SECONDARY EDUCATION 0,87738 CLASS SECONDARY EDUCATION 0,

74 Structure D G C SC P WEIGHT (%) SUBCLASS SECONDARY EDUCATION SERVICES 0,87738 PRODUCT SECONDARY EDUCATION (1 A 4 GRADE) 0, GROUP POST-SECONDARY, NON-TERTIARY EDUCATION 0,06237 CLASS POST-SECONDARY, NON-TERTIARY EDUCATION 0,06237 SUBCLASS COLLEGE-BOUND PROGRAMMES 0,06237 PRODUCT COLLEGE-BOUND SERVICE 0,06237 GROUP TERTIARY EDUCATION 3,10988 CLASS TERTIARY EDUCATION 3,10988 SUBCLASS TERTIARY EDUCATION 3,10988 PRODUCT TRAINING IN TECHNICAL CENTERS 0,19706 PRODUCT PROFESSIONAL INSTITUTE EDUCATION 0,35492 PRODUCT UNIVERSITY EDUCATION SERVICE 2,55790 GROUP EDUCATION NOT DEFINABLE BY LEVEL OR OTHER LESSONS 0,15110 CLASS EDUCATION NOT DEFINABLE BY LEVEL 0,15110 SUBCLASS EDUCATION SERVICES NOT DEFINABLE BY LEVEL 0,15110 PRODUCT TRAINING COURSES 0,

75 Structure D G C SC P WEIGHT (%) DIVISION RESTAURANTS AND HOTELS 4,42575 GROUP CATERING SERVICES 4,26595 CLASS RESTAURANTS, CAFÉS AND THE LIKE SUBCLASS FOOD AND BEVERAGES EATEN OUTSIDE HOME 3,40180 PRODUCT BREAKFASTS AT RESTAURANT 0,10996 PRODUCT LUNCH AT RESTAURANT 2,66152 PRODUCT RESTAURANT AFTERNOON SNACK 0,11539 PRODUCT SANDWICH AND HOT DOGS EATEN OUTSIDE HOME 0,21947 PRODUCT ALCOHOLIC DRINKS OUSIDE HOME 0,15865 PRODUCT SOFT DRINK AWAY FROM HOME 0,04439 PRODUCT COFFEE AWAY FROM HOME

76 Structure D G C SC P WEIGHT (%) SUBCLASS READY TO GO MEALS 0,86415 PRODUCT EMPANADAS 0,22258 PRODUCT CHIPS 0,03963 PRODUCT MEALS 0,39782 PRODUCT ROAST CHICKEN 0,20412 GROUP HOSTING SERVICES 0,15980 CLASS HOSTING SERVICES 0,15980 SUBCLASS HOSTING SERVICES 0,15980 PRODUCT STUDENT HOSTING SERVICE 0,02414 PRODUCT HOSTING SERVICES AND OTHERS 0,13566 Structure D G C SC P WEIGHT (%) DIVISION MISCELLANEOUS GOODS AND SERVICES 5,80421 GROUP PERSONAL CARE 2,83213 CLASS HAIRDRESSING SALONS AND PERSONAL GROOMING ESTABLISHMENTS 0,42637 SUBCLASS GROOMING SERVICES AND PERSONAL CARE 0,

77 Structure D G C SC P WEIGHT (%) PRODUCT HAIRDRESSING SALONS 0,29386 PRODUCT DEPILATION SERVICES 0,13251 CLASS ELECTRICAL EQUIPMENT FOR PERSONAL CARE 2,40576 SUBCLASS PERSONAL CARE ARTICLES 0,12598 PRODUCT ELECTRIC SHAVING AND HAIR REMOVAL MACHINES 0,02161 PRODUCT HAIR ELECTRIC EQUIPMENT 0,02648 PRODUCT DISPOSABLE RAZOR 0,05640 PRODUCT MISCELLANEOUS ITEMS, PERSONAL CARE 0,02149 SUBCLASS PERSONAL HYGIENE PRODUCTS 1,30882 PRODUCT COTTON 0,02335 PRODUCT ORAL HYGIENE ITEMS 0,16711 PRODUCT TOILET PAPER 0,34654 PRODUCT SOAP 0,09257 PRODUCT DISPOSABLE DIAPERS 0,30573 PRODUCT FEMININE HYGIENE PROTECTION 0,09954 PRODUCT SHAMPOO AND CONDITIONER 0,27398 SUBCLASS BEAUTY PRODUCTS 0,

78 Structure D G C SC P WEIGHT (%) PRODUCT SUNSCREEN 0,11221 PRODUCT WAXES AND CREAMS FOR HAIR REMOVAL 0,03286 PRODUCT COLOGNES AND PERFUMES 0,26881 PRODUCT SKIN CREAM 0,21628 PRODUCT DEODORANTS AND ANTIPERSPIRANTS 0,16858 PRODUCT MAKEUP 0,09995 PRODUCT DYEING HAIR AND HAIRSPRAY 0,07227 GROUP OTHER PERSONAL ITEMS 0,45911 CLASS JEWELRY AND WATCHES 0,16772 SUBCLASS PERSONAL ACCESSORIES 0,16772 PRODUCT JEWELRY 0,11995 PRODUCT WATCHES 0,04777 CLASS OTHER PERSONAL ARTICLES 0,29139 SUBCLASS OTHER PERSONAL ARTICLES 0,29139 PRODUCT WALLETS AND BAGS 0,18340 PRODUCT ARTICLES FOR BABY CARRIAGE 0,06470 PRODUCT PERSONAL MISCELLANEOUS ACCESSORIES 0,

79 Structure D G C SC P WEIGHT (%) GROUP INSURANCE 0,24574 CLASS TRANSPORT RELATED INSURANCE 0,24574 SUBCLASS TRANSPORT RELATED INSURANCE 0,24574 PRODUCT CAR INSURANCE 0,24574 GROUP FINANCIAL SERVICES 1,85949 CLASS OTHER FINANCIAL SERVICES 1,85949 SUBCLASS ADMINISTRATION FEES FINANCIAL EXPENDITURE 1,85949 PRODUCT FINANCIAL EXPENDITUREE 1,85949 GROUP OTHER SERVICES 0,40774 CLASS OTHER SERVICES 0,40774 SUBCLASS FEES AND OTHER COSTS 0,40774 PRODUCT ISSUANCE OF CERTIFICATES 0,08187 PRODUCT PHOTOCOPY SERVICE 0,07626 PRODUCT ASSOCIATION BUSINESS EXPENDITURE 0,03702 PRODUCT NOTARY SERVICES 0,04369 PRODUCT FUNERAL SERVICES 0,08563 PRODUCT LEGAL SERVICES 0,

80 Glossary 66 Adquisición - acquisition Adquisición de un bien the acquisition of goods (purchase) is the act by which the actual ownership of the good changes to the consumer. Adquisición de un servicio the acquisition of a service refers to the time the delivery of the purchased services is completed. The time at which goods and services are paid for to the sellers or service providers is not necessarily the same than the time the expenditure takes place. Agregación aggregation is the process of combining, or adding, different sets of transactions to obtain larger set of transactions. The aggregate is the result of the process of aggregation. Agregado elemental - elementary aggregate is the lowest level of aggregation for which value data are available and used in the calculation of the consumer price index (CPI). These refer to price aggregates that do not have weight within the basket s structure. Arrastre carry-forward is a procedure by which a price that becomes unavailable at certain time is imputed with the last value reported for such good or service. Bien goods are physical objects for which a demand exists, over which ownership rights can be established and whose ownership can be transferred from one institutional unit to another. Bien durable a durable good is one which satisfies consumers needs over time and that disappears slowly assuming a normal or average rate of physical usage. Bien no durable a non durable good is one which, once consumed, disappears. In food, there is a class of non-durable goods that disappear even when not used; these goods are known as perishable goods. Bien no perecible non perishable goods are on-durable consumer goods having received special treatment to extend its life, which do not need refrigeration and usually last more than a month. Bien perecible perishable goods are non-durable goods that decay rapidly and that need special treatment to increase its duration (maturity date within one month); usually fresh food falls inside this category. Cálculos especiales special calculations are all measure aimed at obtaining a price that fails to be collected through direct observation at a point of sale. 66 Most definitions have been taken from ILO et al. (2006), pages and from the Manual of the National Accounts System,

81 Cuenta tipo standard bill standard bill is the valuation of a set of "n" compulsory and supplementary items or components that make up the final value that a household has to pay for the service provided. In the case of utility services, like water and electricity, the amount payable has a fixed component (which does not depend on the consumption) and a variable one (which depends on the monthly consumption). Empadronamiento a census is the process of verifying the goods and services available at establishments, companies and households. Gastos expenditures are the values of the amounts that buyers pay, or agree to pay, to sellers in exchange for goods or services that sellers provide to them or to other institutional units designated by the buyers. Hogar colectivo a collective household is formed by a group of non-relative persons, who share the dwelling or part of it and that live together because of health, work, religion, study reasons, and so on. Hogar particular - private household group of one or more people that, brought together or not because of relationship, share food and budget and live in the same housing unit or being part of it. Imputación imputation is the procedure for entering a value for a specific data item where the response is missing or unusable. The value is usually the variation of a similar variable. Índice de Precios Laspeyres the Laspeyres price index is defined as a fixed weight, or fixed basket, which uses a typical basket of goods and services consumed during the base period. The base period serves as both the weight reference period and the price reference period. The Laspeyres index is computed as: P t N i= 1 = N i= 1 p p t i t i q q 0 i 0 i Where t p i : prices of goods and services i in period t 0 q i : quantity of goods and services i in base period ( 0 ) N : total number of goods in the basket 0 p i : prices of goods and services i in base period ( 0 ) 81

82 Investigador de precios the price collector or compiler is an official from INE that carries out the collection process of prices from goods and services that make up the CPI basket. Marco muestral the sampling frame is the list of the units (companies, housing units, stores, etc.) in the universe from which a sample can be selected for statistical purposes. Período base base period usually refers to the period with which all other are compared. However, the term may have other meanings depending on the context. There are three elements: Weight reference period - Given period in which expenditures allow for defining the structure and calculation of the index. Price reference period - is the period whose prices are compared with the prices of other periods. The period whose prices appear in the denominator of the price relatives that are used for computing to calculate the index. The price reference period is usually referred as period 0. The index reference period is the period for which the value if the index is set at 100. Ponderaciones weights refers to measures of the relative expenditure of households in the different products considered to calculate the consumer price index. Precio - the price is defined as the value of one unit of a product. The price may or may not include home delivery, but it must include all indirect taxes or specific taxes, non-discriminatory discounts and discounts not depending on specific methods of payment. Precio a registrar the price to be collected is the price included in the calculation of the CPI base December 2008=100; this includes all taxes, offers and promotions allowing free access to the good or service. Precio ofertado - price offered is the price whose level has been temporarily adjusted at an establishment (or in several), because of a promotion. Producto - a product is a generic term to refer to a good or service that has a weight in household expenditure and is formed with a set of homogeneous varieties. Within the CPI, a product is the representation of an elementary aggregate. In contrast, a variedad or variety is a manifestation of a good or service that varies depending of the brand, description, size, content, packaging and country of origin, among other specific features. 82

83 Producto estacionalidad seasonality products are products that are either (a) not available on the market during certain seasons or periods of the year or (b) are available throughout the year but with regular fluctuations in their quantities and prices that are linked to the season or time of the year and (c) and are composed of seasonal varieties whose presence in the market last around four months. Producto representative representative product is a product, or category of products, that account for a significant proportion of the total expenditure within an elementary aggregate. Producto temporal temporary products are those that are not universally (or generally) available all year. The price collection stage is defined annually, and this has a beginning and an end. Servicio - services are not an independent entity over which property right can be established; also, services are outputs that generally cannot be traded separately from their production. Services are heterogeneous outputs produced to order and typically consist of changes in the conditions of the consuming units realized by the activities of producers at the demand of the consumers. By the time their production is completed they must have been provided to the consumers. Servicio menor - minor services are all services whose classification does not represent a high degree of complexity at product and variety level. Their main characteristics are: (a) their prices do not require special treatment to enter them into the CPI calculation and (b) prices of the different varieties are collected directly at the establishments (similarly than with goods). Sistema de Clasificación del Consumo Individual por Finalidades (CCIF) - Classification of Individual Consumption by Purpose (COICOP): Functional classification of the 1993 System of National Accounts (SNA) used to clearly identify goods and services; it provides statistics that, depending on the experience, are widely interesting for a number of analytical uses and offer users means to restructure key aggregates of the SCN for three types of analysis. Goods and services are arranged in 12 divisions (higher level of aggregation), which are formed by the aggregation of groups. The groups consist of classes and these in turn are composed of subclasses. The subclasses are the result of aggregation of products, which are formed from the aggregation of varieties (elementary aggregate). Transferencia - a transfer is a transaction in which one institutional unit provides a good, service or asset to another unit without receiving from the latter any good, service or asset in return as counterpart. A cash transfer consists of the payment of currency or transferable deposit by one unit to another without any counterpart. A transfer in kind consists either of the transfer of ownership of a good or asset, other than cash, or the provision of a service, without any counterpart. Urbano y rural the terms urban and rural use the census definition, which states that an "urban entity" is a collection of houses concentrated, with over 2,000 inhabitants, or between 1,001 and 2,000, with 50% or more of its economically active population engaged in secondary or tertiary activities. 83

84 Exceptionally, tourist and recreational centres having more that 250 houses concentrated and that fall under the population requirements are considered urban. Therefore, a urban area is a set of urban entities. Variedad - variety: see Product. Variedad comparable Comparable variety: variety that replaces another when this is not present at an establishment when the price recording is taken. In order to be comparable, the variety has to have the same description, similar quality and price level of the variety that is missing or unavailable. 12. Appendices Appendix 1: Features of CPI Base December 2008=100 compared to CPI Base December 1998=100 The new CPI took effect in January 2009 and is to be published on a monthly basis within the first eight days the following month after the measure period. INE reports prospectively in a public calendar 67 the dates and hours when information will become available to the community. The following chart summarizes the main methodological features of the new CPI compared to the previous one. More detailed information for each subject can be found further down this document. Chart No. A1.1 CPIs Methodological Comparison CPI Base December 2008=100 CPI Base December 1998=100 Basket structure data source Sixth Households Budget Survey, Nov 2006 Oct Market research studies 68. Fifth Households Budget Survey, Aug 1996 Jul Geographical scope Greater Santiago area (Santiago s urban areas plus Puente Alto and San Bernardo cities). Greater Santiago area (Santiago s urban areas plus Puente Alto and San Bernardo cities). Base period December 2008 December The indicators release schedule is available at: Market research is used to determine the weight distribution at variety level. For example, annual sales of new and used cars are separated by brand and model in the transport division. 84

85 CPI Base December 2008=100 CPI Base December 1998=100 Reference population Private households in urban zones of the Greater Santiago area. Private households in urban zones of the Greater Santiago area. Classification of goods and services that make up the CPI basket The basket of goods and services comprises 12 divisions, according to The Classification of Individual Consumption by Purpos (COICOP) from 1999, in line with the National Accounts System 1993 (SCN, by its Spanish acronym). The goods and services basket is divided into 8 groups according to the National Accounts System (SCN) from Classification Food and Non-Alcoholic Beverages 1. Alcoholic Beverages, Tobacco and Narcotics 2. Clothing and Footwear 3. Housing, water, electricity, gas and other fuels 4. Furnishings, household equipment and routine household maintenance 5. Health 6. Transport 7. Communications 8. Recreation and culture 9. Education 10. Restaurants and hotels 12. Miscellaneous goods and services 1. Food 2. Household expenditure 3. Household equipment 4. Clothing 5. Transport 6. Health 7. Education and Leisure 8. Other Aggregation level Six aggregation levels: 1. Divisions: Groups: Classes: Subclasses: Products: Varieties Five aggregation levels: 1. Groups: 8 2. Subgroups: Articles: Products: Varieties Criteria used for a product's inclusion and exclusion in the basket Products making up the basket sequentially meet the following criteria: a) Only monetary expenditure is included. The following is included in the basket: a) Products and/or services accounting for more than 0.025% of households total 85

86 CPI Base December 2008=100 CPI Base December 1998=100 b) A 0.1%-minimum quota of households expenditure is used for the Group within Division 1 (Food and nonalcoholic beverages) and 0.2% for the other divisions. c) Representation in total expenditure in excess of 0.020% for products. expenditure. b) Products used exclusively by the 1% of the highest income population were excluded. c) Some direct taxes are included, such as real estate tax. d) Presence in four out of the five quintiles. e) Price collection is feasible. f) Monetary expenditure declared by households associated to investments, intermediate consumption and takes and direct subsidies is excluded. General index: Laspeyres formula General index: Laspeyres formula Aggregation method CPI Division Group Class Subclass Product Arithmetic mean CPI Group Subgroup Article Product (excluding food group) Arithmetic mean Variety Variety establishment Geometric Mean Product (only food group) Variety Variety establishment Geometric Mean Quality changes Overlapping The overlapping method is applied for: Clothing, electrical appliances, electronics, and automobiles. Survey period - Between the 1 st working day and 22 nd day each month, except fruits, vegetables, interurban bus fares and fuels, - Between the 1 st and the last working day of the month. 86

87 CPI Base December 2008=100 CPI Base December 1998=100 which are measured up to a later date - For prices subject to centralized collection the closing date is the 25 th each month. Price sample in a month - Fruits, vegetables, fuels and interurban bus fares: 4 price samples. - Perishable: 3 price samples - All the rest of the Food group: 2 price samples - Other products: 1 price sample - Food and fuels: 4 or 5 price samples. - Electronics, electrical appliances, clothing, health and financial expenditure: 1 price sample. Missing prices - There are four types of missing prices: a) contingent or stock-out, b) seasonal c) temporary - Missing prices are imputed and are included in the index calculation in the reference month (see section Addressing missing prices ). - Prices of a variety of fruit and vegetables are only excluded, when there are less than 35% of observations for the CPI construction. - Missing prices are imputed and included in the following month's CPI calculation. Imputation maximum time One month. Exceptionally two months when it s about seasonal and temporary products. There is no explicit way. In practice, there is a threemonth average, except for seasonal products. Addressing prices in the event of clearance sales, promotions, and other offers - Clearance sales prices are taken into account except for final discounts, discriminatory discounts and stock clearances. - In the case of special pack prices, the criterion is using unitary prices always. - Discount/offer prices are classified into 11 types/situations: 1. Offer by product s Stock clearances are not included. Prices are addressed differently depending on the type of promotion: 1. Buy one get one free: the pack price is taken into account. 2. Gift product special offer: if the gift product is priced, this is discounted from the total offer price. If it s not available, the total price is taken into account. 87

88 CPI Base December 2008=100 CPI Base December 1998=100 characteristics 2. Offer for buying additional quantity of a variety 3. On-pack offer 4. Buy one get one smaller size free offer 5. Not priced gift product offer 3. Products with discounts: The discount percentage is discounted from the total price. 4. Size packaging/weight change: a rule of three is applied and the percentage to be discounted from the price in the establishment is calculated. 6. Purchase with priced product gift offer 7. Offer expressed as a discount percentage 8. Cash off offer 9. Additional free quantity offer 10. Additional free quantity expressed in percentage offer 11. Product available in a different size package offer Season and temporary products - There are generic seasonal products - And temporary products with set periods for price recording There are specific seasonal products Methodological and procedural documentation - Methodology and Conceptual Manual - Procedures Manual - Technical data sheet by product - Product catalogues - New surveying, supervision and training procedures. - Scarce documentation - First eight days each month - First five days each month 88

89 CPI Base December 2008=100 CPI Base December 1998=100 Release schedule Appendix 2: Comparison of New CPI classification with CPI Base December 1998=100 The classification of goods and services making up the New CPI basket splits some of the groups in the CPI Base December 1998=100 basket, as shown bellow. Table No. A2.1 Correspondence between Divisions and Groups for the new CPI with the CPI base December 1998=100 CPI Base December 2008=100 Divisions 1. Food and Non-Alcoholic Beverages 1. Food 2. Alcoholic Beverages and tobacco 1. Food 8. Others CPI Base December 1998=100 Groups 3. Clothing and Footwear 4. Clothing 4. Housing, water, electricity Gas and other fuels 2. Housing and communications expenditure 5. Furnishings, household equipment and routine 3. Household equipment household maintenance 6. Health 6. Health and personal care 7. Transport 5. Transport 8. Communications 5. Transport 7. Education, culture and leisure 9. Leisure and Culture 8. Others 10. Education 7. Education, culture and leisure 1. Food 11. Restaurants and hotels 8. Others 12. Miscellaneous goods and services 8. Others The basket of goods and services used to compute the CPI Base December 1998=100 was classified into 8 groups according to the National Accounts System (SCN) 1968 and an internal INE classification. There are also differences at lower aggregation levels, as shown in the figure and table bellow. 89

90 Figure No. A2.1 CPI Base December 1998=100, Classification Example CPI IPC Group Foo d Housing Subgroup Bread, cereals and appetizers Meat, cured meat And sausages Carnes, cecinas Article Bread Biscuit s Appetizers Productos Product Regular bread Special bread Variety Unpackaged Wheat bread, regular Unpackage d wheat bread, special Table No. A2.2 CPI Base December 1998=100, Aggregation Level Level CPI Base December 1998=100, components by aggregation level Group 8 Subgroup 41 Article 156 Product 482 Variety 90

91 12.3. Appendix 3: Weighing Comparison, baskets from 1998 and 2008 Food and non alcoholic Alcoholic beverages, tobacco and narcotics Clothing footwear Furnishings, household equipment and routine household maintenance and Housing, water, electricity, gas and other fuels Health Transport Communications Leisure and culture Education Restaurants and hotels Miscellaneous goods and services BASKET 2008 BASKET Appendix 4: Classification of Individual Consumption by Purpose (COICOP), Examples Examples of COICOP classifications in the new basket. Division 1. Food and Non-Alcoholic Beverages 4. Housing, water, electricity, gas and other fuels 7. Transport 91

92 Group Food Electricity, gas and other fuels Transport services Class Bread and cereals Gas Passenger transport on urban roads and highways Subclass Bread and other bakery products Piped gas Passenger transport services on urban roads Product Bread Piped gas Shared cab transport service a Unpackaged regular Variety/ bread Town gas Shared cab fare Note: /a: includes name and/or brand, description and measure unit Appendix 5: Variety examples 92

93 Product Batteries Powdered and liquid detergent Brand Eternal batteries Lavamejor Description AAA alkaline Lemon scented washing powder Package Display Box Content (quantity) 8 2 Measure unit Units Kilograms Origin Imported National Bar code Note: Fictitious names were used to design this table for example purposes only. 93

94 12.6. Appendix 6: General algorithm used for CPI calculation Period t-1 Period t Period t+1 Auxiliary registry from Registry of valid prices from previous WEEK S Price entry Entry validatio n Approach used for special offer Registry of Validation of prices and relatives Registry of validated prices Deliber ate sample and season Registry of price entries Progress and manageme nt report Auxiliary replacement registry for coming Registry of discontinued prices (eventual retrieval) WEE K 4 Representativene ss and missing price imputation Registry of valid, imputed Indices calculation CPI variation Forms preparati on CPI process ends, variations and incidences are published Descriptions 94

95 Start Compound procedure Data storage Multiple report Report Automatic decision Custom decision User message Appendix 7: Aggregation towards higher levels Aggregation of intermediate indices (starting from the product level upwards) is based on expenditure weights. The CPI calculation methodology and the basket construction were defined so as to have unique criteria for aggregation, just like most of the world's statistics institutes. From the subclass level up to the construction of the general index, the aggregation methodology is based on the weighted arithmetic mean. Upper-level indices are calculated by arithmetic aggregation and belong to this group: a) product micro index, b) subclass micro index c) class micro index, d) group micro index, e) division micro index and f) Consumer Price Index (CPI). a) Calculation of the product micro index (MIPRO ): This calculation allows grouping the information of the respective subclasses. MIPRO t ( p) = IPRO t ( p) MIPRO * 100 t 1 ( p) MIPRO p The 0 ( ) = MIPRO(p) for the CPI is set for December b) Calculation of subclass micro index (MISCL ): 69 The following rule can be used if changing base period A for base period B is required: t MIPRO MIPRO B = MIPRO t A 0 A *100 95

96 MISCL t ( s) = ns MIPRO t ( p) Wscl p= 1 ( s) * Wpro ( p) Where ns : Denotes the number of subclasses in the basket Wpro (p) : Addition of each product s weights Wscl (s) : Addition of each subclass weights The subclass index is: ISCL MISCL t t ( s) ( s) = t 1 MISCL( s) *100 c) Calculation of the class micro index (MICLA ): MICLA t ( c) = nc MISCL t ( s) Wcla s= 1 ( c) * Wscl ( s) Where: nc : Basket's number of classes Wcla (c) : Addition of each class weights The class index is: ICLA MICLA t t ( c) ( c) = t 1 MICLA( c) *100 d) Calculation of the group micro index (MIGRU ): 96

97 MIGRU t ( g ) = ng MICLA t ( c) Wgru * Wcla c= 1 ( g ) ( c) Where: ng : Basket's number of groups Wgru (g) : Addition of each group s weights The group index is: IGRU MIGRU t t ( g ) ( g ) = t 1 MIGRU( g ) *100 e) Calculation of the division micro index (MIDIV ): MIDIV t ( d ) = nd MIGRU t ( g ) Wdiv g= 1 ( d ) * Wgru ( g ) Where: nd : Basket's number of divisions Wdiv (d ) : Addition of each division s weights The division index is: IDIV MIDIV t t ( d ) ( d ) = t 1 MIDIV( d ) *100 f) Calculation of Consumer Price Index for month t : IPC(t) The CPI is monthly computed using the following formula: IPC( t) = 368 p= 1 MIPRO p Wpro t ( ) * ( p) Where: total number of goods and services making up the basket is

98 12.8. Appendix 8: Calculation of Index variations The general public is interested in knowing prices monthly behaviour and its comparison with the previous month, as well as the month's result compared to December previous year and the annual change or variation. Such variations are computed as follows: a) Monthly variation: Change in the CPI for month t compared to previous month t 1. In a mathematic form: CPI( t) % CPI variation ( t) = 1 *100 ( 1) CPI t b) Accumulated variation from December previous year: It measures CPI variation since December of the previous year up to month t of the ongoing year. The following formula is used: CPI accumulated variation % in month CPI ( t) t= 1 *100 (December previous year) CPI c) Annual variation: It measures the change between the current month s CPI and the CPI reported for the same month of the previous year. The following formula is used: CPI( t) CPI annual variation% month t= 1 *100 (month previous year) CPI t Usually, the inflation of a given year refers to the variation between the CPI reported in December of a given year and the index for December of the previous year Appendix 9: Incidence calculation Incidences measure weight or contribution of a particular product, group or division (generally speaking it can be referred to as an index) on the CPI total variation. The public is often interested in knowing which products are impacting the CPI evolution in the month, year to date or year on year, therefore INE calculates and publishes the following incidences: index Monthly incidence= CPI i, t 1 * t 1 indext * W index 98

99 Annual accumulate d indicence = index i, dic * CPI dec index t * W index indexi, t 12 * indext 12 - month incidence= * W CPI t 12 index Where: W index : Measures the weight of the index under study in the CPI basket : Variation Appendix 10: Sample of establishments The process to determine the prices that must be collected in order to have a representative and consistent sample involves definition and identification of the establishments to be monthly visited to collect the information. The sample size of the new CPI basket was defined using the following inputs: Sample frame of the Household Budget Survey (EPF, by its Spanish acronym), the products (and therefore, their prices) in the CPI Base December 1998=100 basket, the establishments directory, the special sample directory and studies on products and varieties. Putting this information together and subsequent processing allows defining samples of prices per product, points of sale samples, samples by type of establishment of products and varieties, special samples and ultimately the sample for colleting the prices. Interrelations among each of these sources are represented in the figure bellow.the sample size of the new CPI basket was defined using the following inputs: Sample frame of the Household Budget Survey (EPF, by its Spanish acronym), the products (and therefore, their prices) in the CPI Base December 1998=100 basket, the establishments directory, the special sample directory and studies on products and varieties. Putting this information together and subsequent processing allows defining samples of prices per product, points of sale samples, samples by type of establishment of products and varieties, special samples and ultimately the sample for colleting the prices. Interrelations among each of these sources are represented in the figure bellow. 99

100 Figure No. A10.1 Simple designs Sample frameworks used Defining the best sample size of goods and services to be probed monthly calls for a number of surveys and studies to be conducted previously, including: Company and establishment verification survey This survey allows disaggregating companies in points of sale (establishments), in order to collect the information required to develop the sample frame for the points of sale survey. Points of Sale Survey The data collected by this survey enables measuring the percentage distribution of similar products sales compared to the establishment total sales, as well as the distribution of product consumption by type of establishment and geographic zone. Product-Variety Survey or census-taking survey Implies verifying presence of Products-Varieties in the CPI basket, by type of establishment, and by geographic zone of interest. Sample of Prices by Product Previous surveys produce the necessary information to statistically determine the minimum number of prices to be collected by product. 100

101 Studies on administrative records and external sources Other administrative sources available at INE were analyzed such as: Chile s national tax bureau (SII), Transport Ministry, Pension Fund Managers, among others. Additionally, market databases were sourced. Price Survey All the previous work results into the monthly survey used to record prices of the products-varieties determined in the CPI basket, by type of establishment and capital cities of interest Selection of the establishments sample In order to determine a suitable sample size, it is necessary to previously design a directory including all companies meeting the eligible criteria; then the information is updated and corrected to identify representative points of sale and finally identify products-varieties sold at the selected establishments Appendix 11: Exceptional situations regarding prices Discount prices or promotions With establishments frequently using strategies like "special offers" to promote their products and attract clients, these discount prices will be collected if they are explicit so the researcher does not have to make the calculation himself. One criterion required for such special prices is universality 70. The way of registering prices for purposes of the CPI calculation in the event of special offers will depend on the specific situation or type of offer. Eleven situations are described bellow 71 : 1) Offer by product s characteristics: a variety is found at the establishment at a discount price transcending all other varieties with the same characteristics. Example: any 10-unit tissue package costs $100. Treatment: the offer price is taken into account The price offered must be universal, that is to say, it must be available for any kind of consumer regardless his/her characteristics, payment method and units bought. The price to be registered is the price that will be included in the CPI base December 2008=100 calculation after sales and promotions effects have been filtered. On the other hand, the price offered is the price the researcher observes at the moment of collecting the monthly information and whose level has been temporarily modified in the establishment (or at several establishments) in the wake of a price strategy. 101

102 Price to register= Price offered 2) Offer for buying additional quantity of a variety: two or more equal products (in units) being sold at the price of (n 1) units. Example: Buy one get one free (BOGOF); Buy 2 get 3, etc. Treatment: the unit price of the variety to be registered is computed by dividing the price offered by the number of items included in the promotion. Price to register = Price Offered Number of units included 3) On-pack offer: the item is not found at the establishment in units. Example: 6-pack of beer. Treatment: the unit price of the variety to be registered is computed dividing the price offered by the number of items included in the promotion. Price to register= Price Offered Number of units included 4) Buy one get one smaller size free offer: Offer including two products of the same brand and variety, but one with reduced content/smaller size. Example: 750cc pisco bottle plus a 350cc bottle, which means 1,100cc of pisco. Treatment: the proportional price for the variety's new content is calculated. Price to register = Previous content Current content * Price Offered 5) Not priced gift product offer: product with original weight (to be called main product) and the other (different to the main product) in a promotional size not available for sale at the establishment. Example: shampoo plus dyeing cream. Treatment: the price to be registered is the offer's total price. Price to register= Price offered 6) Purchase with priced product gift offer: pack of two different products, in their original sizes and packages, where the price of the product included in the basket cannot be found in the establishment, but the other can. Example: shampoo plus conditioner. 102

103 Treatment: 50% of the gift's value is considered in the offer price. Price to register = Price offered - Gift price 2 7) Offer expressed as a discount percentage: the considered item is sold at a price with a given percentage off for all consumers. Example: a kilogram of bananas with 15% discount. Treatment: the percentage off is discounted from the normal price. Price offered*(100 - % discount) Price to register= 100 8) Cash off offer: there is a cash-off offer over the item s regular price. Example: $2,000 Chilean pesos discount on the normal price. Treatment: the price to be registered is computed by subtracting the discount from the price offered. Price to register= Price offered - cash discount 9) Additional free quantity offer: the item comes in a promotion so the custom package is added an extra amount of content. Example: 200gr-coffee can including 50gr extra for free. Treatment: the proportional price for the larger quantity is calculated. Previous content Price to register= Current content * Price Offered 10) Additional free quantity expressed in percentage offer: the item comes in a promotion so the conventional package is added an extra percentage. Example: 200gr coffee can including an extra 10% of coffee Treatment: the proportional price for the regular content is calculated. 100 Price to register = 100+ % gift * Price offered 103

104 11) Product available in a different size package offer: the item is sold at an establishment in a size different to the size specified in the basket and it is not possible to secure the original size price. Example: the price of ham to be registered is by kilogram, but at the establishment this product is only available in a 250grs display. Treatment: the proportional price for the desired unit is calculated. Price to register= availablemeasurement unit * Price observed Prices of missing varieties After the sales/promotions period concludes at an establishment, a procedure must be defined so that entering the information does not produce false alerts for anomalous prices. It is also possible that the variety under monthly monitoring is no longer available at the establishment. Treatment for seven situations is analyzed bellow: 1) Prices go back to normal levels: this happens in the period subsequent to the end of the sales season. In such cases, prices are recorded and included in the index calculation as seen in the establishment. Example: the sales week is over at a department store and prices go back to normal. Treatment: the price seen at the establishment is registered. 2) Prices of comparable varieties: the searched for variety is not available in a small establishment (specialized or not), but the surveyor finds another variety of different brand, but with the same description, similar quality and same price level. Example: a convenience store or so-called small establishment does not sell Florcita oil in 500gr bottles, and they only sell Vida oil, 500gr bottles; but price is similar and falls into the same category of products. Treatment: the total price observed is taken into account and maintained until the next period when the second price collection is conducted and is possible to calculate a variation. The current month s price is imputed using the appropriate method as described in the missing prices section. 3) Price of a new variety: the variety whose price is usually registered is not available at the establishment, but there is another variety, with different brand and description, that is declared as continuity of the requested variety. Example: a variety has not been found in any establishment, so a decision is taken on its replacement. 104

105 Treatment: surveyors register the observed price; this value is maintained until the following month, when it is possible to measure the first variation and to incorporate it into the CPI calculation. In the month when a single price collection is taken, the imputation for missing prices procedure must be applied. 4) Temporarily out-of-stock variety: the relevant item has not been discontinued, but it is not available at the establishment where the price survey is taking place. Example: for lacking the time the person in charge of procurement has not been able to restock his business and therefore the variety is not available at the establishment. Treatment: no price is entered and, for CPI calculation purposes, imputation is done according to criteria described in the missing prices procedure section. 5) Variety no longer for sale: a variety is declared discontinued or will not be sold again at the establishment. Example: the variety will not be sold for a long period as result of a particular business decision or for external reasons. Treatment: no price is entered and imputation methods apply until the variety is definitively excluded from the basket, once a replacement is defined. 6) Seasonal product: the item has been declared a seasonal product and is not available in the market during certain periods of the year. Example: the price of peaches has not been recorded in July since it is out of season and not available in the market. Treatment: no price is entered and imputation is applied according to criteria described in the missing prices procedure section. This procedure involves recording the price at the beginning of the selling season and maintaining it until the following month, when the first price variation is added into the CPI calculation. 7) Other situations: any other reason not described or not occurring at the time the CPI methodology was being developed. Treatment: all available information is included in the monthly record of prices for subsequent analysis. 105

106 Appendix 12: Data validation When entering the price monthly information into the CPI modules, different criteria start working in order to ensure no sampling errors are being made and also to detect anomalous observations (outliers). The idea behind this is proving the veracity of anomalous observations and therefore offering control criteria capable of assuring the index quality. The following sections provide a description on the methods and criteria applied. Validation of monthly information for the construction of the CPI is undertaken in three phases: a) data validation at typing/entering values b) longitudinal validation and c) representativeness of collected prices. Even when sample sizes for price collection are representative, every so often the collected data may be incomplete or not provided within the necessary deadline to proceed with the CPI calculation with certain quality level. (For instance, shortages due to harsh weather) Statistical techniques are used in these cases to quantify the impact of having a reduced sample. Validation methods and criteria: a) Data validation when typing/entering values. This is the primary verification in order to ensure prices entered do not have errors, such as non-numerical characters, incorrect numeric values or not matching. b) Longitudinal validation. Longitudinal validation criteria are applied for all data collected within a month and after it has been confirmed there are no typing errors. Methods used are interquartile 72, confidence intervals and the Tukey algorithm applied on price relatives. Interquartile method 73 : This method is used for detecting outliers in the weekly collected data. To this end, prices reported for the current week are compared with the previous 74. This method uses relatives' quartiles as inputs. When a price relative is out of the tolerance limits, analysis must be performed. The review of the evidence by the supervisor can result in correction of the value or maintaining it, after which the price will appear in the CPI calculation system as validated. Confidence intervals: This method is used to detect outliers with monthly data entered into the CPI calculation system. At this level of validation, the arithmetic mean and the standard deviation are computed for each variety making up the basket. If the statistic calculated is within the confidence interval constructed, prices must not be verified; if opposite, values must be verified. This procedure is also applied for analyzing price observations at establishments over time. To this end, mobile averages of the variations reported during the last three months are calculated It is first applied on the accumulated weekly data. See ILO et al (2006: ), paragraphs This method is also applied when the current month is compared with the previous month. 106

107 Tukey algorithm 75 : This algorithm uses a trimmed means approach. When price relatives are within Tukey limits, the price does not require further research and is considered valid. When relative prices are beyond Tukey limits, they are classified as "unacceptable" and therefore a review to determine the origin of the anomalous behaviour will be required. c) Representativeness: This review implies analyzing if the statistical distribution of price ratios in the collected sample 76 (at the level of variety prices in establishment) does not differ significantly from the distribution in the intended sample 77. Out of the existing statistical methods, the comparison of descriptive statistics in the intended sample 78 with the collected samples (percentages by establishment, sales size, etc. are compared.) is used. When the statistic calculated is beyond the tolerance limits, the variety is not properly represented and therefore imputation must be conducted according to the criteria defined for missing prices, because the data being used is insufficient to obtain quality CPI. When statistics calculated are within the tolerance limits, the variety is properly represented and with the data used it is possible to obtain a CPI with the quality standards required See ILO et al. (2006: 208, 260), paragraphs and Sample distribution generated with data collected in each period t. Sample distribution defined at the beginning of the price collection process. A Methodology for Assessing Sample Representativeness, Environmental Forensics 6, pages 71-75, by Ramsay and Hewitt (2005). 107

108 Appendix 13: Index's statistical quality The index's quality is checked with each of the validation and representation criteria mentioned above, but two more can be added: a) Impact review: This analysis focuses on analyzing the types of errors usually seen in all price indices, which are mainly described based on sampling errors and errors unrelated to the sampling; these result from calculating the population's CPI using a sample of observed prices Errors arising from the selection, estimation, overcoverage, response, processing, sub-coverage and non response are analyzed. Systematic analysis of these errors provides a possibility to improving or cutting costs. Prices of products which in principle could have higher impact on the CPI calculation are verified so that the amount of imputed prices is minimal, distribution of prices is the most suitable and comparison of items is adequate. b) Index statistical quality: A final aspect of validation comes from calculating the index's statistical quality as a whole. Given the complexity for the estimator itself, which is the result of several aggregations, both arithmetic and geometric, and of the sample design used for price collection, the most convenient and less biased option for the index variation calculation is using re-sampling techniques (also known as replication). These replication techniques are completely non parametric methods to estimate sample distributions and standard errors; they work by taking a large number of sub-samples from a given sample. The parameter can be estimated in each sub-sample. Under relatively weak conditions, it can be proved that distribution of resulting estimations is near the original estimator sampling distribution. The Bootstrap method is used for this analysis. 108

109 Appendix 14: Special Calculation List Product Including Scope/coverage Information Source Rent Direct surveying in households 4 household rotative Households Systematization of public data. samples. direct data. Houses and departments with 2 Samples of predefined Information or 3 rooms, plus 1 or 2 communes (or from papers bathrooms are measured district) according to and web sites. separately. census frame. Drinking Fix expense, Consumption, Census Water Water Electricity Collection, Treatment Fix cost, meter rental, consumption Piped gas Town Natural Fix charge, meter rental, Consumption Bulk liquefied Fix charge, meter rental, gas Garbage collection service Private/Dome stic cleaning service Toll and Electronic Toll services Interurban train transport service Air Transport services. consumption Minimum value a household must pay Survey on households. Discriminating between full time, part time and working day. Continues calculation of previous CPI. Census Census Census Sample according to municipal income for cleaning service rights. Households sample Companies companies Power distribution companies Distribution companies Distribution of companies Municipalities Households direct data. Data from General Index of Earnings per Hour (IR) Cost per portal at any hour Census Company and Public information Survey Monthly 4 monthly samples Monthly Monthly Monthly Monthly Twice a year (March and September) Monthly Monthly Train tickets, different classes. Sample of frequent routes Companies Monthly National International Ticket and boarding fee Sample of frequent routes and companies Companies Monthly Multimodal Transport services. Residential Internet Connection Telecommuni cations pack service Mobile telephony service Adult ticket, all services, any hour and possible combinations Various plans Plans by type of combination Pre-payment Mixed Post-payment Fixed and variable costs (depending on use) and organized by type of accounts. Census Transantiago Monthly Representative companies and plans Representative companies and plans Representative companies and plans Companies Companies Companies Monthly Monthly Monthly 109

110 Residential telephone communicatio ns service Residential Paid TV service Education services - Nursery school service Education services - Kindergarten Pre-payment Regulated Flat rate Fixed and variable costs (depending on use) and organized by type of accounts. Various plans Annual registration fee, monthly tuition, one-time enrolment fee and other compelling expenditure. Annual registration fee, monthly tuition, one-time enrolment fee and other compelling expenditure. Representative companies and plans Representative companies and plans Sample of establishments Sample of establishments Companies Companies Educational institutions Educational institutions Monthly Monthly Registration fee (Dec), monthly tuition (Mar) Registration fee (Dec), monthly tuition (Mar) Education services - Elementary school 1 st cycle (1 st to 4 th grade) Annual registration fee, monthly tuition, one-time enrolment fee and other compelling expenditure. Sample of establishments Educational institutions Registration fee (Dec), monthly tuition (Mar) Education services - Elementary school, 2 nd cycle (5 th to 8 th grade) Education services - Secondary education (1 st to 4 th grade) Education services - Collegebound programmes or preuniversity studies Annual registration fee, monthly tuition, one-time enrolment fee and other compelling expenditure. Annual registration fee, monthly tuition, one-time enrolment fee and other compelling expenditure. Regular Intensive Registration fee and monthly tuition Sample of establishments Sample of establishments Sample of establishments Educational institutions Educational institutions Educational institutions Registration fee (Dec), monthly tuition (Mar) Registration fee (Dec), monthly tuition (Mar) Annually (March) intensive (June) Education services - technical education centres Education services - Professional institutes Education services university studies Registration fee and monthly tuition Registration fee and monthly tuition Public Private Registration fee and monthly tuition Sample of establishments Sample of establishments Sample of establishments Educational institutions Educational institutions Educational institutions Registration fee (Dec), monthly tuition (mar) Registration fee (Dec), monthly tuition (Mar) Registration fee (Dec), monthly payment (Mar) Training Registration fee and monthly Sample of establishments Educational Monthly 110

111 courses tuition institutions Insurance Financial expenses Car insurance gross premium Including VAT Retail consumer loan (credit card maintenance commission, administration fee for shopping at issuer s stores, administration fee for shopping at associated stores, cash advance commission and credit life insurance) Banking consumer loans (administration fees, notary expenses, stamp duty, fire insurance premium, credit life insurance premium, unemployment insurance premium and others) Mortgage loans (property analysis assessment, notary expenses, stamp duties, registration right at the Real Estate Registry Office, fire (and earthquake) insurance premium, credit insurance premium, unemployment insurance premium and others) Products associated to current account (Current Account [maintenance commission, opening commission, ATM use commission and debit card], Credit line [Annual commission for opening and renovation, credit life and handicap insurance (new credit lines) and credit life insurance], Credit Cards [Maintenance, cash advance, instalment loans, fuel, fixed instalment purchases, foreign currency purchases and cash advance, shopping abroad, cash advances abroad, quota ($ and US$)], Plans [Maintenance commission, opening commission, credit card commission, debit card commission, credit line and credit life insurance commission]) Insurance companies and insured cars sample Companies sample: Retail stores and banks Companies Companies Monthly Monthly Note: In the "Including" column, bullet points ( ) represent varieties. 111

112 13. Bibliography Australian Bureau of Statistics (2005), Australian Consumer Price Index: Concepts, Sources and Methods 2005, ABS Catalogue No , Commonwealth of Australia. Available at: o=6461.0&viewtitle=australian%20consumer%20price%20index:%20concepts,% 20Sources%20and%20Methods~2005~Latest~17/08/2005&&tabname=Past%20F uture%20issues&prodno=6461.0&issue=2005&num=&view=& Bureau of Labor Statistics (BLS) (2007), BLS Handbook of Methods, Chapter 17: The Consumer Price Index, US Department of Labor, updated 06/2007. Available at: European Commission (Eurostat)/IMF/OECD/UN/World Bank (1993), Manual of the System of National Accounts 1993, sponsored by the Intersecretarial Working Group on National Accounts, Brussels/Luxemburg, New York, Paris, Washington, D.C. Available at: European Communities (2000), Commission Regulation (EC) N.2602/2000,November 17 (L. 300/16) Official Journal of the European Communities. Available at: Departamento Administrativo Nacional de Estadística (DANE) (1999), Metodología IPC -1998, Colombia. Available at: Eurostat (2001), Compendium of HICP Reference Documents, Working Documents cat. N KS-AO EN-I, European Communities. Available at: EN.PDF Instituto Brasileiro de Geografía e Estadistica (IBGE) (2007), Sistema Nacional de Índices de Preços ao Consumidor, Métodos de Cálculo 5ª edição, Série Relatórios Metodológicos, volume 14. See: Instituto Nacional de Estadística y Censos, Costa Rica (INEC) (2006), Metodología del Índice de Precios al Consumidor, base julio 2006, San José, Costa Rica, September. Available at: \04indicesDePrecios\consumidor2\Metodologia/archivosMetodologia/Metodología&nomArchiv o=metodología Instituto Nacional de Estadísticas (2002), Metodología IPC 2001, Madrid, Spain. Available at: 112

113 National Statistical Institute of Chile (2008), Metodología. VI Encuesta de Presupuestos Familiares , Santiago, Chile. Available at: ologia_vi_epf.pdf National Statistical Institute of Chile (1999), Statistics and Economy, Especial Edition, New CPI, first semester. Partially available at: Instituto Nacional de Estadísticas y Censos (INEC) (2005), Metodología del Índice de Precios al Consumidor IPC, Quito, Ecuador. Material available at: OECD (2002), Main Economic Indicators, Comparative Methodological Analysis: Consumer and Producer Price Indices, volume 2002, supplement 2, July. Available at: Office for National Statistics (ONS) (2007): Consumer Price Indices Technical Manual, 2007 Edition, May, London. Available at: ILO (2003), Consumer Price Indices, Final report of the 17th International Conference of Labour Statisticians, Geneva November 24 to December 3, 2003, ICLD/17/2003/3. Available at: WCMS_087570/index.htm International Labour Office (ILO), International Monetary Fund (IMF), Organization for Economic Co-operation and Development, Statistical Office of the European Communities, United Nations, World Bank, Consumer Price Index Manual: Theory and Practice, Washington. Available at: Statistics Canada, Consumer Price Index, data available from its website: Statistiska Centralbyrån (SCB) (2001), The Swedish Consumer Price Index. A handbook of methods, Stockholm, Sweden. Available at: 113