Statistics New Zealand is progressively redeveloping a suite of business price indexes (BPIs) comprising the producers price index (PPI), the farm expenses price index (FEPI) and the capital goods price index (CGPI).
As part of the redevelopment, New Zealand practice for various aspects of BPI compilation has been compared with the practices of five other Organisation for Economic Co-operation and Development (OECD) countries.
This article looks at how BPI prices are collected in New Zealand and in the five other countries.
2. International practice
For purposes of international comparison, Statistics NZ selected five OECD countries representing Europe, North America, Asia and Australasia: the United Kingdom, Australia, Canada, the United States, and Japan. They were selected in large part based on the reputation of their economic statistics and availability of comprehensive documentation in English. The sources used (see the references section) are publicly available and may not reflect the most current developments in those countries.
It is worth noting that each of these nations has a much larger economy than New Zealand, making possible certain sampling procedures that may not be possible in a nation of four million people. It may be a worthwhile future endeavour to make a similar comparison with a second tier of smaller OECD nations, such as Ireland.
Statistics NZ tried to make the closest possible match with New Zealand’s BPIs in terms of data coverage. Each nation arranges its indexes slightly differently. For ease of comparison, the indexes under consideration are included below.
The UK Office for National Statistics PPI suite includes: home PPIs (domestic), export price indexes and import price indexes. Capital goods are included in their coverage.
The Australian Bureau of Statistics (ABS) produces a suite of PPIs, an import price index, and an export price index. The PPIs include two services: transport (freight) and storage division, and the property and business services division.
Statistics Canada produces an Industrial Product Price Index (IPPI), a Raw Materials Price Index (RMPI) and four service PPIs (accounting services, informatics professional services, consulting engineering services and traveller accommodation services). Canada produces a Machinery and Equipment Price Index that parallels New Zealand’s CGPI, and a Farm Input Price Index (FIPI) that parallels New Zealand’s FEPI.
The U.S. Bureau of Labor Statistics (BLS) produces a PPI that includes capital goods. The PPI covers almost the entire output of domestic goods-producing sectors, and many service industries. Import and export prices are collected and indexed separately.
The Bank of Japan produces a Corporate Goods Price Index composed of a Domestic Corporate Goods Price Index, an Export Price Index, and an Import Price Index; capital goods are included in its coverage. They produce a separate Corporate Service Price Index.
The New Zealand suite of PPIs comprehensively covers both goods-producing and service industries.
3. Price collection
The BPIs are calculated quarterly from price quotes, which are collected mainly by the Commodity Price Survey. Approximately 10,000 individual commodity items are surveyed from about 2,500 respondents. Prices are generally collected each quarter with the price at the fifteenth of the middle month of the quarter being measured. Prices may be obtained monthly or annually depending on the nature of the item. Some commodities are not directly priced but are derived from other data sources. For example revenue and volume data is sometimes used to calculate unit prices.
Other sources of price data used in the BPIs include prices collected for the Consumers Price Index and Labour Cost Index. Publicly available data is also used, including prices published in regular publications, meat schedules, and the like.
Price quotes are generally used in more than one PPI outputs industry index, representing the prices received by producers for both representative and non-representative commodities produced by that industry. For example, wool prices are collected mainly for the livestock and cropping farming outputs index. However, wool is also produced by groups like the dairy cattle farming, horticulture and fruit growing industries, hence wool prices are included in these indexes as a ‘non-representative’ output.
The price quotes are also used in the PPI input indexes and often occur in more than one index. For example nearly every industry consumes electricity during the production process, hence electricity prices are used in nearly every inputs price index.
Office for National Statistics (UK)
Prices of imported raw materials and semi-manufactured goods are collected as part of the PPI, while export prices are collected on a separate form from the Home PPI. For the Home PPI, 9,000 prices are requested from 5,000 suppliers on a monthly basis for products made and sold within the UK.
For imports, 2,500 prices are collected from 1,600 suppliers. For exports, 3,800 prices are collected from 1,900 suppliers.
A recent innovation as of 2000 was the use of a field officer to liaise with contributors. Many contributors use the telephone data entry system to submit their price information.
Australian Bureau of Statistics
Prices are predominately collected using quarterly mail questionnaires. A small number of prices are collected from administrative sources, such as the Wool Market Indicator. Each questionnaire is specific to a particular respondent and uses terminology agreed upon in advance. They describe in detail the specifications being priced and the basis on which the prices are to be reported. This facilitates the accurate reporting of prices while minimising respondent burden.
Price collection is spread over the three months of the quarter. Average quarterly prices are collected for volatile items such as metal ores. Annual prices are collected in the few cases where prices are known to be set annually.
During preliminary contact with respondents, it is stressed that prices for actual transactions are required, reflecting any discounts, whether those vary continuously with each sale or whether there are standard rates of discount depending on the class of customer, size of order or so on. In the subsequent validation of the regularly supplied price quotations, one of the most important concerns is that the prices quoted are what actually prevail in the market. For this reason the commodity specialists try to ensure that their contact in each manufacturing company is someone who can supply that information.
About 9,000 prices are returned by mail monthly from about 3,000 producers, usually over a three-week period, on questionnaires containing specifications for the selected products originally supplied by the respondent. The prices requested are for the 15th of the month or the nearest prior business day for comparable transactions. However, if special circumstances exist where respondents provide more than one price for the month, a weighted monthly average is derived. Responding to this survey is mandatory.
IPPI prices are collected directly from survey respondents and derived from other surveys. About 700 of the 980 Principal Commodity Group Aggregates are accommodated by direct survey, representing about 90 percent of the 1987 value of manufacturing. The other price movements are estimated indirectly either from that 90 percent or by borrowing price movements from other price series.
In rare cases where, for a particular commodity, there are no prices collected due to either an insignificant level of production in Canada or a lack of respondent cooperation, proxy series are constructed. Proxy series may consist of several other reported series combined together, or use similar representative price indexes from another programme or statistical agency (the Canadian Consumer Price Index and the U.S. Bureau of Labour Statistics indexes are the most common sources).
In the RMPI, approximately 34 percent of the data is collected by direct survey, 60 percent of the data from administrative sources and the remaining 6 percent from proxy imputation (or borrowing), usually from a similar commodity at the next stage of processing.
The prices used for domestic machinery and equipment are manufacturers' selling prices free on board plant orders in the middle of the month. Data is collected directly from survey respondents and derived from other surveys. Prices for imported machinery and equipment are taken from the United States PPI.
Responding to the FIPI survey is voluntary. Data is collected directly from survey respondents on customised questionnaires and extracted from administrative files. Prices are collected at different points in the year, depending on when a given input is likely to see its prices change. Price information is collected by several means including direct mail survey, telephone interview, other sources within Statistics Canada, and from other agencies related to agriculture (for example, Agriculture and Agri-Food Canada, Canadian Turkey Marketing Board).
Bureau of Labor Statistics (USA)
Voluntarily participating establishments are asked to report their prices as at Tuesday of the week containing the thirteenth of the month. Each month approximately 100,000 prices are collected from 30,000 reporters. Nearly all establishments report prices through the mail. However, the use of electronic reporting methods such as fax is gradually being expanded. Some farm product prices are those quoted on organised commodity exchanges or central markets.
For industries other than retail trade, a PPI price is defined as the net revenue accruing to a specified producing establishment from a specified kind of buyer for a specified product shipped under specified transaction terms on a specified day of the month. Retailers are considered suppliers of services, so retail output is measured as the difference between the retail selling price of a good and the acquisition price for that same item.
Bank of Japan
Approximately 8,300 prices are collected monthly by mail from 3,000 companies in the Domestic Corporate Goods Price Survey.
Corporate Service Price Index data is collected on a separate monthly postal survey (3,000 prices from 510 companies). Export and import prices are collected separately.
Of the five selected nations, four compile indexes on a monthly basis, with only Australia producing quarterly indexes. While postal collection remains the norm, the UK offers telephone data entry (which streamlines the process by eliminating the time and labour-intensive data entry stage). In terms of the number of prices collected, New Zealand collects quite a high number relative to the size of its economy.
Statistics New Zealand; Producers Price Index: Concepts, Sources and Methods (Dec 1999). business-activity-stats-1999
Statistics New Zealand; Information about the Producers Price Index (PPI); http://www2.stats.govt.nz/domino/external/omni/omni.nsf/outputs/Producers+price+index+(PPI)
Statistics New Zealand; Information about the Commodity Price Survey; http://www2.stats.govt.nz/domino/external/omni/omni.nsf/outputs/Commodity+Price+Survey
Statistics New Zealand; Information about the Capital Goods Price Index; http://www2.stats.govt.nz/domino/external/omni/omni.nsf/outputs/Capital+Goods+Price+Index
Statistics New Zealand; Information about the Farm Expense Price Index; http://www2.stats.govt.nz/domino/external/omni/OMNI.NSF/Outputs/Farm+Expenses+Price+Index
Ian Richardson, Office for National Statistics (UK); Producer Price Indices: Principles and Procedures (2000).
W. McLennan, Australian Bureau of Statistics; Analytical Framework for Price Indices (Feb 1997).
W. McLennan, Australian Bureau of Statistics; Producer Price Index Developments (Mar 1999).
United States Bureau of Labor Statistics, Rebasing of Selected Producer Price Indices (Oct 2001). http://www.bls.gov/ppi/ppibase.htm
United States Bureau of Labor Statistics; PPI Frequently Asked Questions (Nov 2004). http://www.bls.gov/ppi/ppifaq.htm
United States Bureau of Labor Statistics; PPI General Overview (Mar 2004). http://www.bls.gov/ppi/ppiover.htm
United States Bureau of Labor Statistics; BLS Handbook of Methods (Sep 2003). http://www.bls.gov/opub/hom/homtoc.htm
Ministry of Internal Affairs and Communication; Guide to Official Statistics in Japan (Oct 2004). http://www.stat.go.jp/english/index/official/index.htm
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