Volume 1: Consumer Price Indices

Ireland

Official title

Consumer Price Index.

Scope

The index is computed in February, May, August and November. It covers all private households in the country without size or income limits.

Official base

Mid-November 1989 = 100.

Source of weights

The weighting pattern is based on the best available estimates of the current average weekly expenditure on consumer goods and services by all households in the country. These estimates were derived almost entirely from the results of the large scale national household expenditure survey which was conducted during 1987 specifically for this purpose. The survey covered a national representative sample of 7,705 private households throughout the country. Fieldwork commenced in February 1987 and terminated in April 1988. The survey expenditure estimates, which related to the calendar year 1987, were updated to mid-November 1989 using the percentage changes between 1987 and mid-November 1989 in the prices of the individual items covered by the former index series. Accurate information was not available on any quantitative changes in the detailed pattern of household consumption during this two-year period; no adjustments were made for this.

The expenditure corresponding to unpriced varieties in the item category is either added directly to the weight of similar varieties considered to exhibit the same price trend or distributed proportionately over all the priced varieties.

Weights and composition

Major groups	Number of items	Weights	Approximate number of price quotations
Food (including meals out)	50	25.7528	12700
Alcoholic beverages	3	11.7301	1400
Tobacco	3	3.3382	400
Housing:
Rent	1	1.5150	900
Mortgage interest	1	3.3864	2
Repair, decorations, water and house insurance	3	1.6098	400
Fuel and light	7	5.9012	800
Clothing and footwear	24	6.7229	4300
Durable household goods	13	4.7146	4200
Other goods (cleaning products, hygiene, sports and recreational goods, etc.)	20	5.8502	5400
Transport	13	13.7488	1400
Services and related expenditure	21	15.0850	5600
Total	159	100.0000	39000

Household consumption expenditure

The index covers all consumer goods and services for which private households incur expenditure. In addition to food, drink, clothing, footwear, etc., this includes house insurance, motor taxation and insurance, driving licences, subscriptions to clubs, societies, associations and trade unions, mortgage interest payments and credit purchase instalments. As a price index, the CPI cannot in practice embrace goods and services which either have no price or cannot be priced. For this reason, the following items of household expenditure are excluded from the index coverage: church and charity donations, ground rent, personal cash allowances, lottery and betting payments. Furthermore, since the CPI is based on the concept of household expenditure, the following non-purchased consumption items are also excluded: the value of own farm or garden produce consumed by households, social welfare and other benefits in kind, imputed rents of owner-occupied dwellings. Certain other items of expenditure are also outside the scope of the index even though they affect the living costs and budgets of many households, namely: life assurance premiums, pension contributions, mortgage capital repayments, repayments of other personal loans, capital expenditure on the outright purchase of a house or on major structural extensions and repairs, other forms of savings and investments, social insurance contributions and income tax.

Method of data collection

Prices are collected each quarter on the Tuesday nearest to the middle of February, May, August and November from about 3,000 retail outlets and service establishments in all towns with 10,000 or more inhabitants and a representative sample of smaller towns.

The total number of different varieties priced is 807. 403 varieties are priced locally. The remainder either involve a single enterprise (e.g. electricity, bus and rail services, post and telephone charges), relate to small groups of companies (e.g. domestic gas, fuel oil, etc.) or need not be comprehensively priced at the local level (e.g. fees for doctors, dentists and opticians, regular subscriptions). These are priced directly by the Central Statistics Office (CSO) in special postal and telephone inquiries.

The prices collected are those which are actually paid by the consumer in cash transactions. Estimates, averages or ranges of prices are not accepted. The price quotations include indirect taxes. Credit charges are ignored and discounts are also excluded unless given to everybody. Special offer and sale prices are accepted if they were operative on the pricing day, but price quotations for shop-soiled, damaged or sub-standard articles being sold at clearance prices are not accepted. List prices are not collected unless they are actually charged to the consumer.

Credit purchase payments for domestic appliances, acoustic appliances, motor cars and motor cycles are collected separately. Separate price indicators are used for interest payments and repayments of advances based on a fixed pattern of hire-purchase and credit sales agreements of varying ages. Price indicators based on current cash prices are used for the expenditure weight corresponding to the down-payment made on new agreements.

Housing

The CPI covers housing costs actually incurred. Specific account is taken of changes in the cost of the following housing items: rent (private and local authority); local authority service charges; house insurance (all dwellings); repairs and decorations (all dwellings); mortgage interest payments (dwellings owned with mortgage). The gross payment of mortgage interest (i.e. before deduction of income tax relief) is used for both weighting and pricing purposes. The capital element of mortgage payments is not included in the concept of household expenditure covered by the index as it relates to the acquisition of a valuable capital asset (i.e. the dwelling).

Changes in the average level of rents paid by local authority tenants are incorporated in the index each quarter. Calculations are based on details of the total number of such dwellings and the aggregate rents paid, obtained directly from each local administrative area. Changes in the level of rents charged in respect of privately-owned dwellings are also taken into account each quarter. A special direct rent inquiry is undertaken each quarter by CSO staff in the Dublin area and by the part-time private price collectors in the small provincial towns. Two longstanding postal inquiries addressed to small panels of landlords and tenants respectively continue to be conducted.

The actual housing costs of owner-occupied accommodation are covered (i.e. imputed rent is not taken into account). Changes in mortgage interest costs are based on a fixed pattern of building society and local authority mortgages of varying ages, amounts and interest rates. The capital element of mortgage repayment is not covered. Details of water charges are obtained once a year from local authorities.

The price indicator for house insurance is based on standard insurance rates for private dwellings and their contents as well as on appropriate indices for value updating. Prices for a representative selection of materials for home repairs and decorations are obtained each quarter by postal inquiry from a national panel of merchants.

Specification of varieties

Pricing procedures are based strictly on the principle that an identical quality or brand of each selected variety must be priced as far as possible in the same shop on each occasion. The specifications of selected varieties are of a general nature. These delineate a range of products (i.e. particular brands, qualities, sizes, etc.) from which individual price collectors are free initially (or on replacement) to choose a specific product for regular pricing. For example, in the present series, a selection of five varieties is listed under the item category toys, of which one is a model car. No further specifications are given and individual price collectors are free initially to select for regular pricing any of the different types of model cars available locally. The only restriction to their choice is that the particular model selected has to be popular, suitable for regular pricing (i.e. can be specified precisely) and likely to be available in the long term. Once chosen initially, individual price collectors are required to price the identical product on each successive occasion. Because of the interval between each such occasion and the possibility that different price collectors might be involved, the price booklets are specially designed so that the exact specification of each selected product is recorded to ensure that the identical set of articles is priced on each occasion as required.

Under these arrangements, the specific products priced by different price collectors for a particular variety are not the same. The method used ensures that the prices of a wide variety of brands and qualities are collected in different places and, as they reflect local tastes and preferences, are more representative of the price movements of the variety in question than would be the case if a single narrowly defined identical variety was priced everywhere.

Substitution, quality change, etc.

Substitution is made at the local level when discontinuities occur as a result of model and quality changes or if a product is in low supply or no longer in popular demand. Alternative popular articles are then introduced.

The price booklets are designed to allow the detailed specifications of the new products to be inserted. The particular discontinuity is restricted to a single price booklet and the relevant price is excluded from the index calculations until two consecutive quotations are again obtained for the substitute. Price collectors are also allowed to substitute a new article in place of any original product which is in low supply or no longer in popular demand locally. However, the price of a particular product is used in the compilation of the index only when two consecutive quarterly price quotations are available for it.

A change in a shop surveyed is also treated as a discontinuity and the prices for the particular products affected are not used in the index calculations until successive quarterly quotations are obtained from the same shop. The price booklets are designed so that the shop in which each particular product is priced is clearly identified. If a particular outlet can no longer be used (e.g. goes out of business, refuses to cooperate, etc.) the price collector replaces it with a similar popular shop in the same area.

An official of the CSO regularly visits all provincial price collectors to ensure that the pricing arrangements are adhered to. The CSO officials who survey prices in the Dublin area are instructed in the Office.

Seasonal items

The prices of some fresh food items, such as eggs, vegetables, fruit, etc., fluctuate seasonally in varying degrees due to market forces of supply and demand. Traditionally, the price changes for three items (i.e. eggs, potatoes and tomatoes) have been corrected for seasonality in the CPI because, when account is taken of their weights, their seasonal pattern could have a discernible impact on the index. As this could make it unduly difficult to distinguish underlying price trends, the seasonal price variations for these items continue to be excluded from the index. This is done using the X-11 Variant of the US Bureau of the Census Method 11 Seasonal Adjustment Program.

There are other index items whose prices tend to change regularly at the same time each year simply because they are levied annually at that time. These include are school and university fees, annual subscriptions to clubs and societies, etc. Items with a high duty content (drink and tobacco) are also affected in this fashion by budget changes. Price changes for these particular products and for other items with insignificant individual seasonal contributions are reflected in the CPI without adjustment. For this reason, seasonality is not fully excluded from the CPI.

Computation

The index is computed according to the Laspeyres formula as a weighted arithmetic average with fixed base, using weights corresponding to the base period.

National averages of the prices are first calculated for each sample variety. These averages are compiled in two stages. Simple arithmetic average prices are calculated within town size strata, then the strata average prices are combined into national averages using retail sales strata weights derived from the 1987 Census of Services. Department stores are segregated as a separate stratum so that their prices are incorporated in the national average with appropriate weighting. Complementary national average prices are recalculated for the preceding quarter using matched sets of quotations. The ratio of these directly comparable national average prices gives the estimated quarterly change in price. This is used to update the previous quarter's cost for the fixed quantity of each index variety to give the current quarter's cost for the constant basket. Indexes of price changes can then be derived directly for all items or any combination of them by dividing their total current cost by their corresponding cost in the base quarter.

Other information

Separate indices are calculated for the ten commodity groups distinguished in the former series, namely: Food; Alcoholic drink; Tobacco; Clothing and footwear; Fuel and light; Housing; Durable household goods; Other goods; Transport; Services and related expenditure. An additional index is also published for energy products covering fuel, light, petrol, motor diesel, motor gas (LPG) and motor oil. For continuity purposes, each of these series is also published on the former base mid-November 1982=100.

The next CPI updating should be completed in November 1996 based on the results of a 1994 large scale household expenditure survey.

Organisation and publication

Central Statistics Office: Irish Statistical Bulletin (Dublin).

Idem: Consumer Price Index - Introduction of Updated series - Base: Mid-November 1989 as 100.