Paul J Crowley Head of Prices & International Relations Central Statistics Office Ireland

1. Paul J CrowleyHead of Prices & International Relations Central Statistics Office Ireland

2. Purpose of Presentation • To examine the need for an EU wide study of price comparisons • If there is such a need – can it be met? • Show how a more limited approach worked in the case of Ireland • Illustrate what other information is available to consumers • Discuss the proposed methods to derive detailed prices • Consider the better use of existing data

3. Detailed Prices 2 Drivers • Average price data required for product & market monitoring • Publication would serve to improve HICP Communications –> proof official inflation covers products/services people buy However arguments to support these propositions ->weak

4. Product & Market Monitoring Assumption efficiency of single market -> price convergence However markets are different -> different levels of income -> different levels of direct & indirect taxation -> different standards of living -> different consumer tastes & patterns -> not homogeneous – types/sizes/brands/quality

5. Product & Market Monitoring Direct comparison – items must be comparable with respect to size, quality, popularity and available in each MS -> examples – Coca Cola, Big Mac, Petrol, Cinema Problems – Clothing – style, quality, brand, outlet Example – cup of coffee (include service charge, table service, 1 cup) €2.26 Austria €0.37 Bulgaria – description is too loose – multiple types

6. 1st of Experimental Results - HICP ->Data gaps – countries missing ->Issues of comparability ->Range of prices (lowest & highest) ->Unit conversion (KG) – unit but not an average price -> ignores - outlets/tight vs. loose specifications • Quality –> data fails to meet the strict requirements • Presents more questions than answers • Question the validity of results -> ‘meaningless’ & ‘questionable’

7. Quality & Comparability ‘Comparability is important up to a certain degree….products can be considered sufficiently comparable if they are perceived by consumers as equivalent and substitutable’ -Eurostat Fundamentally disagree with this statement Objective is to compare prices -> prerequisite -measure or compare the same items -> impact on quality/accuracy & reliability

8. Case Study - Ireland Ireland - island nation separated from rest of Europe But border frontier with Northern Ireland (UK) – cross border trade UK (including NI) main reference wrt price levels – media European prices – holidays (alcohol, eating out)

9. Ireland -Retail Up to 2008 - rapid economic growth, growth - employment, incomes, standard of living, influx of UK multiples Media reporting of price comparisons between Ireland ‘south of border’ and NI ‘north of border’ – specifically Tesco which operated north & south – price variation • People ‘voted with their feet’ and travelled North • Impact – price war, UK sourcing, advertising, cheaper prices

10. Retail – Other examples • UK Multiples £sterling vs. € price £50 - €75 (€55) • North South Price Comparisons – Dental/Car Mainten • Prescribed Drugs – Spain – National Radio • Eating out/Alcohol – holidays – price comparisons

11. Other sources of information • Media – price comparisons – ‘Rip Off culture’ • National Consumer Agency – price surveys of supermarkets • Revenue Commissioners – north/south survey of alcohol/tobacco/motor fuel – excise duties • Private websites – www.valueireland.ie - 78 different sites • UBS Prices & Earnings Survey – time per hr • Comreg – regulator – www.callcosts.ie • AA – petrol & diesel prices – eu comparisons

12. Role of the HICP Measure the evolution of prices & not to produce absolute measure of average prices • Experts (HICP WP) – fundamental issues with use of HICP as the mechanism to create detailed prices • Lack of comparability makes it impossible to produce robust, reliable and quality comparisons • National Baskets - national competence/national consumer tastes & patterns – not comparable across the entire EU – for neighbouring countries -> virtually impossible to make direct comparison across EU except where product/service is identical e.g. can of Coca Cola

13. Alternative Sources PPPs - more suitable - significant activity – comparability & represenativity - MS price same or similar ‘representative’ item - results – validation across EU -> But recognise there are difficulties - 3 year cycle/Capitals Integration of PPPs and HICP – difficulties & issues Alternative sources including private sector – resources & cost benefit

14. Detailed Prices – Are they required? Currently quality data does not exist Is there a perceived or actual need? – who determines this? DG SANCO identifies the need for hundreds of products - this will never be met Danger in ‘contaminating’ HICP by modifying, changing, adding product descriptions – must be reflective of national patterns

15. Detailed Prices – Are they required? 2 Consumers - ‘passing reference/interest’ but unlikely to travel to Bulgaria to avail of Coffee which is a fraction of the Irish price -> more important is value and price comparisons within the national territory – which supermarket is better value, better choice and has special offers – advertising/own experience Discerning consumer–awareness/shop around –better value

16. Conclusion Q How much can be achieved by making better use of existing data? • Better use & explanation of PPPs (PLIs) – overall comparison of price levels • Increase understanding of HICP/CPI and maximise use of existing data • Supplement with range of alternative sources (media/www/regulators) Q Integration of HICP/PPPs - No significant value in integration Q When and where can current data collected be supplemented by other sources? - By who , costs & benefits