Volume 1: Consumer Price Indices

Israel

Official title

Consumer Price Index.

Scope

The index is compiled monthly and covers all families living in urban areas.

Official base

1987 = 100.

Source of weights

The weights and selected items were derived from a household expenditure survey conducted during June 1986-May 1987 among a representative sample of approximately 5,000 households with one or more members, living in 104 urban areas. The weights were adjusted to take into account price changes between the survey period and the base period.

Weights and composition

Major groups	Number of items	Weights	Approximate number of price quotations
Food (excl. fruit and vegetables)	270	16.51	7000
Fruit and vegetables	90	6.42	17000
Housing	5	16.46	(a)
Household maintenance (incl. fuel and light)	85	9.33	2000
Furniture and household equipment	185	7.18	3000
Clothing and footwear	190	7.20	12000
Health	80	5.50	1000
Education, culture and entertainment	260	12.01	3000
Transport and postal charges	85	15.25	1000
Miscellaneous	110	4.14	1000
Total	1355	100.00	47000

Note: (a) See under Housing below.

Household consumption expenditure

This comprises the value of commodities and services received by the household, not including commodities related to investments or savings (e.g. purchase of a flat, vehicle, stocks etc.). Consumption is measured as the sum of payments which the household paid or undertook to pay. Consumption includes additional expenditure connected with purchases, e.g. interest, commission, transport fees or installation fees (if paid to the vendor).

Also included in consumption is the calculated value of depreciation and alternative interest on capital invested in housing or a vehicle, or a value for the use of housing or a vehicle not privately owned by the household and not paid for. The services of commodities and services received from employers are also included. Not included in consumption are payments on account for future purchases (for goods not yet received), debt repayments for past purchases and returned expenditures. Included are second-hand purchases and trade-in of used goods in part payment for new goods, where only the difference in value between the old and new good is considered as consumption; insurance associated with specific consumer goods and health insurance. Excluded is expenditure on direct taxes, social insurance, pension funds, life insurance, money-gifts and lotteries.

Method of data collection

The items are selected according to the value of expenditure in the household expenditure survey and the number of varieties that exist for the item. Items accounting for more than 0.1 per cent of household expenditure are priced separately. Items accounting for less then 0.1 per cent are priced separately only when no suitable items are available to represent their price movements. Expenditure for items not priced is transferred to similar items that can represent their price movements properly.

The sample size for the outlets was determined according to the weights of the group of items for an outlet and the variance between the price changes for each item in the group in the various outlets. The localities were sampled with probability proportional to size within geographical strata, size being the total household expenditure in the locality. Prices for most items are collected each month by agents, from 1,300 outlets. Prices for electricity, gas, water, medical care education and transport and communication etc. are collected by mail or telephone, from 600 reporting sources.

Prices are collected by 20 enumerators who transmit the data to field offices located in the three large cities, which transfer the data to the centre in Jerusalem. Discounts are recorded if they are offered to all purchasers. Sale prices are collected where applicable. Market prices are used, not official tariffs. Items are priced on the basis of cash purchases. Second-hand automobiles and owner-occupied houses are priced according to their local prices.

Prices for most items are collected to obtain a monthly average, by staggering the outlets into four groups, each priced in a different week.

Housing

Two panels of rental houses are priced in alternate months, and cover furnished or unfurnished dwellings.

The yearly expenditure on services supplied by owner-occupied dwellings is computed by including the depreciation of the dwelling over time, and the alternative interest on the capital invested in the dwelling.

In the current index, both new and second-hand dwellings which changed hands are priced. The prices are obtained from the forms used for purchase taxes and are supplied by the tax authorities. The data refers to about 3,000 to 4,000 dwellings in a quarter, in 25 urban localities. Data on the quality of the dwellings are used to prepare regression analysis, so that the index only reflects price changes.

Specification of varieties

General specifications are prepared for items. Detailed specifications for each item, e.g. the brand, make, quality, etc., are chosen by the enumerator for each outlet, and prices are collected each month for a specific variety.

Substitution, quality change, etc.

Large quality changes and substitutions are linked into the index, so that their introduction does not affect the price level. Small quality changes are considered as changes in price. Quality adjustments are made only in some special cases, when there are enough characteristics which can be measured.

Seasonal items

Prices of seasonal items are collected as long as they appear on the market. When they are no longer available, their prices are estimated on the basis of price movements of similar items. When the seasonal item again appears its price is compared to the last month for which a price was available. Prior to 1988, changing weights were used for fresh fruit and vegetables.

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.

The index for each item is calculated on the basis of price relatives. If no price is available for an item in an outlet, the price movement is estimated according to price movements in other outlets. If no price is available for the item from any outlet, the price movement of the item is estimated according to that of similar items.

Other information

In addition to the index for all urban families, price movements are calculated for baskets for families in the lower and upper deciles of the income distribution.

Organisation and publication

Central Bureau of Statistics: Monthly Bulletin of Statistics (Jerusalem).

Idem: Price statistics Monthly (Hebrew only).

Revision of consumer price index, published in Price Statistics