Outline Introduction Methodology for compiling CPI Data Collection and Compilation

1. Outline Introduction Methodology for compiling CPI Data Collection and Compilation

2. Introduction Price statistics is one of the major statistical activities in the Central Statistical Agency (CSA) of Ethiopia Consumer Price Index (CPI) and Inflation Rates are the most important macroeconomic indicators CPI measures the average change in price of selected baskets of commodities purchased by households over time.

3. Introduction cont. It shows how much the cost of living has risen or fallen due to price changes Inflation rate is the percentage change in the general price level or CPI from one year to the next Inflation rate measures how fast prices are rising

4. Introduction cont. CPI has paramount importance and widely used to: monitor the inflation rate and to take various price adjustment policies as tool in wage negotiation and in determining the wage levels adjust social security benefits (used to index pensions and public service remuneration)

5. Introduction cont. set inflation rate targets for the purpose of monitoring and evaluation undertake various financial/budgetary adjustment policy deflate the household consumption expenditure in national accounts

6. Introduction cont. The CPI results are used by many organizations, such as: Government Agencies, Non Government Organizations (NGO’s) International Organizations Business Community that wish to monitor change in general price movement and to observe its effects on their program implementation and policy decision.

7. II. Methodology for compiling CPI The Ethiopian CPI calculation is based on HICE survey results Relatively important (highly weighted) items based from household expenditure survey results are included in market baskets of goods and services.

8. Methodology Cont. CPI baskets should be manageable in size The Ethiopian CPI is based on fixed items consumed in the base year and it may become out dated over time depending on changes in consumption patterns of the society.

9. Methodology Cont. In revising the CPI every five years the following issues are considered: Revision of index compilation formula, if necessary Selection of reference (base) year Fixing the selection of basket of commodities (based on Consumption Structure) Assigning the expenditure weight All transactions need to be clearly defined and well specified Assigning the base price/reference price

10. Methodology Cont. Selecting a representative markets/outlets Conducting monthly price survey and calculating the results. (Monitoring the price change from the base year /reference year).

11. III. The Ethiopian CPI Data Compilation and Collection. Currently, CSA has 12 CPI's (11 regional and country level) Each region has its own selected baskets of commodities The country level CPI is calculated from regional CPI by using weight matrix. The CPI is reviewed & reweighed almost every 5 years and the last CPI revision was done in 2007 based on 2004/05 HICES. The base period that has been adopted for our current CPI is December 2006 = 100 Each regional and country level CPI are based on prices of 11 major groups.

12. Ethiopian CPI Cont. These groups are basically based on the Classification of Individual Consumption by Purpose (COICOP), with some country specific adjustment, These groups are: Food, Beverages, Cigarette and Tobacco, Clothing and Footwear, House rent, Construction Material, Water, Fuel and Power, Furniture & Furnishings, Household Equipment and Operators Medical care and health, Transport and Communication. Recreation Entertainment and Education, Personal Care and Effects and Miscellaneous goods and Services

13. The Ethiopian CPI cont. The survey design is based on a market based survey approach by selecting 119 representative market outlets. These representative urban markets were selected with the aim of achieving acceptable coverage of both urban and rural markets in the country. For the Ethiopian CPI, about 400 goods and services are priced every month. The total number of price to be quoted in CPI is about 140,000

14. Ethiopian CPI cont. The price data collection activities for consumer products are done from the 1st to 15th (on monthly basis) and the data collection activities for house rent is done from 16th to 20th of the month (on quarterly basis). Data collection is based on objective measurement and interviewing the retailers. The data collection activities for crops and vegetables are done by actually measuring the weight of the crops and vegetables using kitchen balance. Data quality: Enumerators Education Level: Diploma holders (12+2) Training: CSA has a detail instruction manual which explains the concepts and procedure of the price data collection, so that all enumerators will have common understanding and collect the same product every time. At the beginning of every budget year, a week training is provided for all price enumerators and supervisors.

15. Ethiopian CPI cont. Supervision: To insure data quality supervision is crucial and the supervisors are instructed to perform on spot check and to complete a review of all filled-in sheets in the field Data cleaning/price validation- After the prices data have been entered and analysed, the prices which have been reported will be compared with the prices reported by other data collectors. If there is outlier appropriate corrective measure are usually taken The Regional and Country CPI is compiled every month. The CPI results are usually published and disseminated within 10 days in the following month. Dissemination Techniques: Our CPI results is disseminated for users through hardcopy and CSA website (www.csa.gov.et)

16. THANK YOU

17. Joint UNECE/ILO Meeting on Consumer Price Indices Geneva, 7-9 May 2008 Background Paper The Ethiopian Consumer Price Index (CPI) Methodology and Data Collection By Yasin Mossa Central Statistical Agency Ethiopia