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Consumer Price Index (CPI)

Reg ional Seminar on Developing a Program for the Implementation of the 2008 SNA and Supporting Statistics Dr. Cem BAŞ 11-13 September 2013 Ankara - Turkey.

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Consumer Price Index (CPI)

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  1. Regional Seminar on Developing a Program for the Implementation of the 2008 SNA and Supporting StatisticsDr. Cem BAŞ11-13 September2013 Ankara - Turkey

  2. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey Consumer Price Index (CPI) • Definition • CPI History in Turkey • CPI Coverage • Coverage by Numbers • Classification • Data Sources • Sampling • CPI weights (2013) • Prices • Index Aggregation Formula • Reference Period • Laspeyres Aggregation • Annual Update System • Dissemination • CPI Uses in Turkey • Future Plans

  3. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Definition Consumer Price Index (CPI) is an economic indicator that measure the change over time of the prices of consumer goods and services acquired by households Consumer Price Index (CPI) measures the changes the current retail prices of commodities purchased by a group of consumers over a given time period. 2003 based CPI is aimed to calculate the inflation rate by using the change of the prices of goods and services existed in the market. For this purpose, expenditures of households, foreign visitors, constitutional population and all the final monetary expenditures are taken into account. This concept left the owner occupied housing and expenditures from household production out of the coverage from the consumption expenditures.

  4. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey CPI History in Turkey • CPI’s only for Ankara and Istanbul (goes back to 1938) • 1978-79 = 100 Based Urban Areas CPI • 1987 = 100 Based Urban Areas CPI • 1994 = 100 Based Urban Areas CPI • 2003 = 100 Based CPI for Turkey (all areas) (chained)

  5. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey CPI Coverage Geographical coverage: All country 2003=100 Based CPI, • All residential households, • Non-residential households (tourists) • Institutional population living in prisons, barracks, dormitories etc… The target statistical universe is the 'household final monetary consumption expenditure' (HFMCE) within the economic territories of the countries compiling the HICP. The household sector to which the definition refers includes all individuals or groups of individuals irrespective of, in particular, the type of area in which they live, their position in the income distribution and their nationality or residence status.

  6. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Coverage Information by Numbers • Number of items in the CPI basket : 443 • Total number of items at variety level: 1083 • Number of outlets : 27 500 • Number of tenants : 4 552 • Number of settlements (province) : 81 (sub-city) : 74

  7. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Classification Index structure is based upon: COICOP (12 main groups) • CPI with reference year 2003=100 • CPI is calculated for all Turkey and for 26 regions • Sources are HBS, Tourism Survey, Institutional Population’s Expenditures Survey and Official Registrations Exclusions are: • Consumption from household’s own production • Goods received as income in kind or free of charge • Imputed rent

  8. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey CPI Basket The basket of CPI consist of selected goods and services whose prices are derived by price collectors. The main sources of the basket are: Household Budget Survey Administrative data (Mobile phone tariffs and varieties, tickets for railways and airways, models and brands of cars, newspapers, magazines…)

  9. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Data Sources (Weights) Household Budget Survey (Turkey and 26 regions): • To get data on the determination of the commodities and weights for the consumer price indices, • To monitor the changes of households’ consumption patterns, • To collect data on income distribution, • Determination of number and level of poor people • To obtain required data for analysis on households’ living standards, feeding problems, calculations on minimum wage and other social and economic analysis.

  10. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Data Sources (Weights) HouseholdBudgetSurvey: • Household information was compiled by interview, diarykeepingand observation methods. • Each interviewer recorded the data on consumption expenditures and income of 6 sample households monthly on average as a result of 8 times of visit including 1 visit prior to the survey month, twice during the first and second weeks, once during the third and fourth weeks and once following the end of the survey month.

  11. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Data Sources (Weights) Weights for calculating CPI in a given year are mainly based on the data from the HBS (%90). These data are also supplemented and verified using other statistical sources. Such as; tourist expenditure survey (%9), special survey for institutional population (%1) and non-statistical sources (administrative data).

  12. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Data Sources (Weights) At the first step of weighting structure, commodities produced by households for own consumption, imputed rents from dwellings resided by owners and income in-kind excluded. For the insurance and games of chance net consumption application is used. For fresh-fruit and vegetables and clothing-footwear basic heading’s items and variaties seasonal weight approach is used. The weights of basic headings, classes, sub groups and main groups are fixed all of year.

  13. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Data Sources (Weights) After this step, the basket of CPI is obtained and then the weighting structure of both for Turkey and 26 regions are constituted. The consumption of tourists and the consumption expenditures of institutional population are then added to 12 main groups. Administrative data are used for some specific varieties like mobile and stationary phone calling fees, newspapers etc…

  14. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Data Sources (Weights) • p0 : Base year price • q0 : Base year quantitiy • w : Weight • n : Total variable- item-… number • i : Item, basic heading, class…. At the final step, these weighting strustures are price-updated to December t-1. For the weights to be used in 2013, 2011 weights coming from HBS data are price updated by the ratio of December 2012 over average of 2011 in 5 digit COICOP level.

  15. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Data Sources (Weights) 2009 2010 2011 2012 December • Price update in the CIOCOP 5 level • Month to month • + • 2012 December CPI / 2011 Average CPI • development rates are used in price-update • Final weighting structre of CPI • Rate of change in CPI in the general level • Tourism survey and institutional population consumption survey (COICOP 2 level)

  16. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey CPI Weights (2013)

  17. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Sampling • Identify new items that have a significant share of consumption, i.e. 0.1 % of the expenditures covered in the main heading code. • Important to look for new types of items and services, i.e. I-pad, download music, etc • Introduce as early as possible – capture the price decrease • Cut-off sampling in the item and elementary aggragate (variety) levels • Every December all of basket, weights, and definitions are renewed both for Turkey and 26 regions. Regions, outlets, number of price observations, number of renters are reviewed and if there are some requirements they are changed.

  18. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Prices Price coverage of index is constituted of purchasing prices. The prices of goods and services included within the index are retail prices including taxes but excluding any deposits and installments. • Fresh fruits / vegetables, LPG every week, 4 times a month • Oil and diesel daily, • Rents once in three months (at latest) • Other goods and services twice a months • Each month approximately 375 000 prices

  19. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Prices • Rents and the elementray aggregate (variaties) prices are calculated by using Jevon Index (geometric average). • P : Price of elementary aggregates (variaty) • i : Elementary aggregate • n : Number of prices in the elementary aggregate in the same Region

  20. Laspeyres Aggregation in CPI Current price (Pt) (monthly price for the year t) Base price (P0) December(t-1) Prices updated from t-2 to December (t-1) Elementary aggregate Weight (W) December (t-1) 20/30

  21. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Index Aggregation Formula Elementary aggregate: Jevon (geometric mean) Index Formula: Chained Laspeyres Weights and coverage are updated every year. I0:t : index of currentmonth I0:t-1 : thelastcahinedindex (Dec.) of ref. year IDec(t-1):t(m): Dec (t-1)=100 index of currentmonth i : indexlevel (item, basicheading, class, etc.)

  22. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Reference Period Index reference year: 2003 December t-1 (chain procedure) Weight reference period : t-2  December t-1 (e.g. 2011 for 2013) Price reference period : December t-1 (e.g. December of 2011 for 2012)

  23. Annual Update System • Underlying inflation • Update taxes, etc • Update databases, tables, etc. • Annual chaining • December = 100 • Revise the weights • Update the basket of goods • Revised December index • Update the sample of outlets 23/30

  24. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Dissemination • Results of the CPI are announced to the public in the 3rd day or consequent working day of the month at 10:00 with a news bulletin. • The data are disseminated simultaneously to all interested parties through a database and news bulletin. • 9 core inflation calculated by using exclusion method are also published in news bulletins.

  25. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey CPI Uses in Turkey • A measure of inflation as it affects households • Adjustment factor for indexation of prices, wages and other payments • Deflation of series in nominal terms to derive “real” terms • Estimation of the cost of living

  26. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Plans • Constructing new based CPI with more detailed HBS and administrative data • Using Tablet pc for price collection • Using scanner data • Including the internet purchasing in CPI • Class-confined seasonal weight and strict seasonal weight approaches are studied, • New sampling techniques are used for selection of settlements, outlets, brands etc…

  27. Regional Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics11-13 September 2013 / Ankara – Turkey National Seminar on Developing A Program for the Implementationof the2008 SNA and Supporting Statistics in Turkey 10 September 2013 / Ankara - Turkey Thank you for your attention

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