Computation of National Annual Average Prices

1. Computation of National Annual Average Prices Global Office 5th Regional Coordinator’s Meeting October 5-6, 2011 Washington DC

2. Household Final Consumption Price Survey PPPs are calculated based on the national annual average prices of a set of pre-designated products and services. Annual Average In the case of the Household Final Consumption surveys where prices are collected on a quarterly basis, annual prices for the reference year are computed by averaging quarterly-collected prices. National Average Also, national prices are derived from averaging prices collected from multiple locations within a country. If regional weights vary quarter by quarter, price sets need to be first nationalized every quarter and then annualized, and not the other way round.

3. Special Surveys Education Prices are collected once a year. Thus, they provide annual average prices. Thus, they provide annual average prices. The scholastic year may fall in two calendar year (2010/2011 for example). If education surveys are conducted in multiples locations of a country, it is important to annualize them to the reference year (2011) first before nationalizing. Compensation of employees If the country follows the fiscal year calendar, it is important it is important to annualize the data to the reference year (2011). Construction and Machinery and Equipment Collected mid-year prices are considered as annual prices.

4. Types of National Annual Averages Without geographical weights (self-weighted sample design) With geographical weights (hierarchical weighting system) Varying quarterly weights (seasonal items)

5. Computation of Annual Averages Once all prices have been validated, annual average prices will be computed based on cleaned data sets of quarterly prices. If average prices for some quarters are missing, adjustments may need to be made. Similarly, if price collection has taken place in a year other than the reference year (2012 for example), necessary adjustments (back casting for example) have to be made.

6. Issues 1 Backcasting (2012 data to 2011) and Extrapolation (previous years to 2011) 2 Adjustment Factor to nationalize the capital city price data

7. Example (1) All weights and all average prices provided.

8. Example (2) All weights missing. The National Coordinators can simply proceed and use unweighted averages or apply weights from higher groups (such as food for example).

9. Example (3) Weights completely missing for one or more products. The National Coordinators may chose to use unweighted averages for those products only (Product 1 and Product 4). Alternatively, based on experts’ opinions, the National Coordinators can borrow weights from a similar product or a group of similar products.

10. Example (4) Weights partially missing for one or more products. Weights for Product 2 and Product 3 are partially available. If missing weights cannot be retrieved, they will be deemed as zero. Accordingly, average prices for locations with missing weights will not be considered in the calculation of the average price for the respective products.

11. Example (5) Some average prices missing. The price from Region C for Product 2 will not be taken into consideration as explained in the previous case, and, naturally, the missing average price for Region B will not be used either.

12. Example (6) Annual weighted average based on variable quarterly weights.

13. THANK YOU