Harmonized Indices of Consumer Prices (HICP)

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1 Harmonized Indices of Consumer Prices (HICP) Country-specific information on HICP compilation Author: National Statistical Institute of Sweden COUNTRY SWEDEN Last update of this document: June 2009 Last certification: June 2009 Concepts and definitions Definition of the HICP: The HICP (Harmonised Index of Consumer Prices) is a Laspeyres-type index, covering the categories of the COICOP/HICP (classification of individual consumption by purpose, adapted to the needs of the HICP). HICP data for Sweden are available from 1995 (earlier figures are estimated from the national CPI). Differences between the HICP and national CPI: The following expenditure is included in the HICP but excluded from the national CPI: COICOP 06.3: Hospital services. COICOP 12.4, part of: Elderly care. COICOP , part of: Other financial services n.e.c.: Services that are charged in proportion to transaction value. The following consumption expenditure is included in the national CPI but excluded from the HICP: COICOP 04, part of: User capital cost of owner occupied housing (including real-estate tax). COICOP 04, part of: Cost of housing co-operatives (bostadsrätter; measured by imputed rents). COICOP , part of: Games of chance (service charge). The national CPI is designed for several kinds of use, for example compensation. For many years now, the national CPI has been defined as a Cost-of-Living Index (coli). This has implications for the upperlevel aggregation, which deviates from HICP rules. As of 2005, the national CPI uses a superlative index formula (Walsh) for annual link chaining between full years. As far as possible, the HICP and the national CPI share the same source data, data preparation and low-level aggregation. The national CPI is published with a breakdown according to COICOP. There is a CPI Board of Experts, which is authorized to decide on matters of principle for the CPI calculations. Data coverage Population coverage: The covered household population comprises all households purchasing consumer products in Sweden, including institutional households. This is done by using appropriately selected National Accounts (NA) data for the weighting. The NA data in turn are based on both trade statistics and Household Budget Survey data, along with other sources.

2 Geographical coverage: The entire geographical area of the country is covered. The sampling of outlets for price collection uses as the frame a Business Register containing all the outlets in the country. Nature of basic data Timing of price observation: For the central price collection prices are normally collected in the calendar week that contains the 15th day of the month. For the prices collected by price collectors directly from shops the prices are collected during three weeks. The week before the week that contains the 15th day of the month, the week that contains the 15th day of the month and the week after the week that contains the 15th day of the month. Weights: The main sources of the weights are the National Accounts and Household Budget Survey. There are 371 weights at national level. The reference period for the present weights is the year The weights are updated every year. Outlet selection: 800+ outlets are sampled from a Business Register maintained by Statistics Sweden (the NSI). This is done by probability sampling with an Order PPS design (i.e. with selection probability proportional to size). The size measure used for the PPS sampling is defined as the number of employees plus one. The outlet sample is partly renewed annually. Approximately another 800 outlets in the form of websites, shops, etc are used for the central price collection. Techniques of products selection and specification: Approach used for most kinds of products: A purposive sample of product specifications is used. This sample of specifications is annually reviewed so as to currently represent the consumer preferences. The product specifications are fairly wide or "loose". Example: For TV sets the major type of screen and the screen size range are specified, but not the brand or special features. Within the product specifications, the price collectors select models (product variants) to follow price. The price collectors are instructed to choose in each sampled outlet the model that is most sold. Approach used for certain kinds of food products and other daily necessities (parts of COICOP 01, , 02.2, , /3): A sample of narrowly or "tightly" defined product specifications is taken annually by probability sampling with an Order PPS design from wholesalers' product registers. Approach for alcoholic beverages and for pharmaceutical products (COICOP 02.1, ): For alcoholic beverages and pharmaceutical products, index computations are made by the government monopoly companies from comprehensive sets of price data. The product specifications are narrow (tight). Approach used for rentals for housing (COICOP 04.1): Rents for a probability sample of 800 rented dwellings are collected from landlords by a rent survey. Approach used for cars and motorcycles (COICOP , part of /3/4): An Order PPS sample of vehicle models is taken annually. A statistical table on the number of newly registered vehicles by model is used as sampling frame. Approach used for music recordings, video recordings, cinemas and books (parts of COICOP , , ): For music recordings, video recordings and books, prices are recorded for the five currently most popular titles in the outlet. For cinemas a similar approach is used. 2

3 Deviating definitions Deviating definition for COICOP 04.1: Actual rentals for housing: Swedish rents include heating and services relating to the dwelling, such as water etc. The weight is reduced by the cost of heating. Deviating definition for COICOP 04.4: Services relating to the dwelling: These sub-indices pertain to owner-occupiers only. A distinction cannot be made between Water and Sewerage, those sub-indices are identical. Estimation for COICOP : Heat energy Heating price changes in rented dwellings are estimated from rents Sample size (reference year 2009): Approximately price observations for approximately 370 product groups are collected from 1600 retail outlets and other sources. No of price observations per month: Food and non-alcoholic beverages Alcoholic beverages, tobacco Clothing and footwear Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine house maintenance Health (of which, pharmaceutical products: ). 07 Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous goods and services Number of representative items at the lowest classification level (reference year 2009): All items: Food and non-alcoholic beverages Alcoholic beverages, tobacco Clothing and footwear Housing, water, electricity, gas and other fuels 9 05 Furnishings, household equipment and routine maintenance of the House Health 8 07 Transport Communication 2 09 Recreation and culture Education 2 11 Restaurants and hotels Miscellaneous goods and services 28 Methods of price collection Local price collection is used except for the following product categories: 02.1 (except part of 2.1.3): Alcoholic beverages (except light beer) Externally computed index Actual rentals for housing Special survey of landlords Water, services relating to dwelling Central price collection Electricity, fuels Central price collection. Tariffs Pharmaceutical products Externally computed index, modified by NSI to show subsidy changes. 06.2, 06.3 Health, Services Central price collection. Tariffs, subsidy changes , part: Used cars External data supplier. 07 rest: Transport Central price collection. 3

4 08 Communication Central price collection. Tariffs. In 09.2 Durables for recreation and culture: for boats etc. Central price collection Recreational and cultural services Central price collection ; Books; Newspapers and periodicals Central price collection. In 11.2 Accommodation: for camping and cottages Central price collection Social protection, Insurance, Financial services, Other services Central price collection. Tariffs. Compilation practices Computation of the lowest-level indices: For index computation at the lowest level, the ratio of the geometric mean prices is used for almost all aggregates (the Jevons index), whereby low-level weights are used where suitable weighting information is available. From 2005, the only exception is for COICOP Class 04.4, Water and other (municipal) services related to the dwelling, where the ratio of arithmetic mean prices (the Dutot index) is used instead. Index reference period: The index reference period is 2005=100. Data preparation methods Controls on the quality of the data: Collected price data are checked and edited in several steps. First, the price collectors' notes and signal indications regarding model changes, missing prices etc. are reviewed. Checks are made for missing or duplicate price records. Then, lists for editing are iteratively produced and reviewed to check for unexpectedly deviating prices, etc. This is to ensure that such data are not due to mistakes in processing, and the data are edited as and when needed. The price collectors' judgmental valuations of quality changes are also reviewed in this process. The price collectors or outlets are contacted for further information on specific cases when necessary. In a macro-editing step, all CPI staff meet together and review detailed lists from a provisional computation of sub-indices and rates of change, as compared against corresponding data from earlier periods. Treatment of missing items and replacements: Missing prices are normally left out in the index computation, which is effectively equivalent to imputing price changes (since December) by mean price change. For the selection of replacement products, price collectors are instructed to select the model that is most sold in the outlet and which meets the product specification. The price collectors are also instructed to replace models that no longer sell well, even if still available in the outlet. 4

5 Adjustment for quality differences: Quality adjustment is applied only to a specified set of products where quality changes are considered potentially important. Approach used for most kinds of quality-adjusted products (notably in parts of 05, 09, 12): The judgment of price collectors is used for most kinds of quality-adjusted products. The price collector indicates the judged value in SEK of the quality difference between the replaced and the replacing model. The judgments are "supported" by instruction on quality valuation in the price collectors' training and manuals. Approach used for changes in package size: For changes in package size, the price is adjusted in proportion to the size change, where applicable. Approach used for clothing (garments) and footwear (03.1.2; 03.2): Hedonic regression, adjusting for major product features, is used. Furthermore, an adjustment factor accounts for different obsolescence in the annual chaining. Approach used for rental housing (04.1): Dwellings with major quality changes are excluded from the computation (equivalent to imputing their price change from mean price change). Approach used for cars (07.1.1): New cars: Option pricing is used, from year 2007 in the usual form of adjusting for added or deleted features by 50 percent of their market prices as separate options. Changes in engine power and changes in fuel economy are included as features to adjust for. Used cars: A simple hedonic regression model, adjusting for mileage, is used in combination with a successive re-weighting of vintages to adjust for age. Approach used for computers and computer accessories (09.1.3): Monthly chaining is used. Approach used for music recordings, video recordings, cinemas and books (parts of COICOP , , ): A bestseller list approach is used, cf. "Techniques of products selection " above. Introduction of newly significant goods and services: Newly significant goods and services are identified in the annual review of the sample of product specifications. The process is supported by information from price collectors, from the industries concerned, and from Eurostat. Treatment of price reductions: Prices subject to reductions enter into the index computation with the reductions made. However, where appropriate, "regular prices", i.e., prices before the reduction, are also recorded for special needs. Treatment of seasonal items: Product specifications are mostly wide enough to encompass variants of all seasons. For instance, the subcategory "Apples" (in ) includes both Swedish-grown and imported apples and is thus not empty in any season. Only a few sub-categories in footwear (03.2) and sport equipment (09.3.2) are defined as "winter goods", and for these, prices are imputed by carrying them forward from May to September. Index revisions: A technical revision of the HICP series was carried out in January 2006, in preparation for the general change of the HICP index reference year to 2005=100. 5

6 Documentation Publication of the HICP: In the national publication, the HICP is available at overall level. Breakdowns by COICOP sub-aggregates are given for the national CPI but not for the HICP in the national publication. The CPI and the HICP are available on the website of Statistics Sweden (the NSI): The website presents the statistics in HTML and PDF formats and provides a database with detailed time series for the CPI. The website also contains a "CPI handbook" in English, describing the methods for the national CPI used in year 2000, but largely relevant for the HICP too in its present state. Other documents on concepts and methods for the indices can also be found at the website. The national CPI was reviewed by a Government Commission, whose report, under the reference SOU 1999:124 (in Swedish, with summary and annexes in English), is available at Back to top 6