strsubcodechain Consumer price indices - Data and Methods
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Subject: Consumer Price Index

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Glossary Terms: Price index

Key statistical concept
Consumer Price Indices (CPIs) measure the average changes in the prices of consumer goods and services purchased by households. In most instances, CPIs are compiled in accordance with international statistical guidelines and recommendations. However, national practices may depart from these guidelines, and these departures may impact on international comparability between countries. Key methodological issues which can have an impact on the international comparability depending on the approach used by individual countries are:

* the weighting and aggregation systems (source of weights, frequency of revising weights, computation of lowest level indices);
* the treatment of quality differences (several procedures may be used when an item change occurs, depending mainly on: the available information; the importance of the quality change; the size of the price difference arising from this change; the possibility of splitting the price difference into a pure price component and a quality component; the possibility of simultaneously collecting the prices of the two items at least once);
* the selection of replacement items (replacement may become necessary when a product becomes permanently or temporary unavailable but the old and new items are not likely to have the same price);
* the treatment of new items (when a new product has gained a sufficient marked share to be introduced within the basket);
* the treatment of seasonal items (the supplies and prices of some products are subject to marked seasonal variations, mainly in the food and clothing groups); 
* the treatment of rents and home ownership (how to deal with controlled rents, with owner-occupied housing, how to design price surveys when the rental market is small and unregulated…).

For a more comprehensive description of the methodologies for collecting price information and compiling these indices, please refer to the MEI Comparative Methodological Analysis: Consumer and Producer Prices Indices and to the Consumer Price Index Manual: Theory and Practice.
Related Links: MEI Comparative Methodological Analysis: Consumer and Producer Prices Indices

Glossary Terms: Consumer price index


CPIs are presented as an index where the year 2010 is the base year. It should be noted that this reference base year may be arbitrarily chosen and does not necessarily reflect the year to which underlying weights relate.

The OECD calculates three area totals or ‘zones’ (OECD-Total; OECD-Europe; Major seven) for the following product groups: All items; Food; Energy and; All items less food less energy. These area totals are annually chain-linked Laspeyres indices where the country weights for each individual link are based on the previous year’s household private final consumption expenditure of Households and Non-profit institutions serving households expressed in the relevant purchasing power parity (PPP). Hence the aggregate indices are subject to revision as a result of revisions to the national accounts and the PPPs. In general, new weights for the most recent complete year are incorporated in either November or December of each year.

For currently used weights, please see:

Recommended uses and limitations
A time series of changes in one month’s CPI over the previous month provides an indication about the acceleration or deceleration of inflation although this measure may also reflect seasonal variations. However it should be noted that the majority of OECD countries do not produce seasonally adjusted CPIs because seasonal effects are not generally significant enough to warrant it. Changes in one month’s CPI over the same month of the previous year are generally regarded as providing an up-to-date annual rate of inflation. This comparison largely controls for seasonal effects, as long as they occur in the same months every year. However the international comparability of country data is largely affected by how each country addresses the key methodological issues outlined above under key statistical concepts used.

The CPI is used in most countries by the central monetary authority (e.g. usually the central bank) as the key measure of current inflation and is also analysed to provide information on likely future inflationary expectations. The CPI is also widely used in wage negotiations and for adjustments to social security payments (e.g. pensions) through its role as an indicator of changes in the cost of living.

Subject: Consumer Price Index > All items

Item coverage
The headline CPI measure is referred to as the "all items" level. That is, it covers all goods and services included for price measurement in the CPI.
Glossary Terms: Consumer price index (CPI) basket

Subject: Consumer Price Index > OECD Groups > Energy (Fuel, electricity and gasoline)

Item coverage
Energy refers to items "electricity, gas and other fuels" as defined under the Classification of Individual consumption According to Purpose (COICOP 04.5) and "fuel and lubricants for personal transport equipment" (COICOP 07.2.2).

Subject: Consumer Price Index > Harmonised prices

Item coverage
Within the European Union, Harmonised Indices of Consumer Prices (HICP) are consumer price indices compiled on the basis of a harmonised coverage and methodology. HICPs at the "all items" level are presented for 21 European countries, for the Euro area and for the European Union. For further information on HICP, please refer to the definition presented by Eurostat HICP Eurostat methodology
Glossary Terms: HICP