Consumer Price Index (CPI) Rebase 2016
Frequently Asked Questions
What is a CPI rebase?
The Consumer Price Index (CPI) is rebased every five years. From January 2017, the CPI will be published to base mid December 2016=100. The main work at the rebase is to ensure that the methodological basis upon which the CPI is constructed is robust. Therefore, the composition of the basket of goods and services is examined, the weights of the items in the basket are updated and other methodological changes are implemented.
How have the CPI statistical outputs been affected by the rebase?
From January 2017, the official monthly and annual inflation rates will be calculated using the CPI mid-December 2016=100 series. The monthly CPI release will predominantly be based on the new series. The older series’ (Dec 2011=100, Dec 2006=100, Dec 2001=100 etc.) will continue to be published on StatBank (CSO Main Data Dissemination Service on our website) and updated monthly. As before, the Harmonized Index of Consumer Prices (HICP) will be published to base 2015=100.
Should I use the new rebased index to calculate inflation?
The monthly and annual inflation rates (i.e. percentage change in the index) are the same regardless of which index is used in the calculation. However, there are small differences in the answers due to rounding. From January 2017, the CSO will use the newest index to calculate the official inflation rates that are published in the CPI release.
Have the methodological improvements been implemented in both the CPI and HICP?
Yes, all improvements that have been implemented in the CPI have equally been implemented in the HICP. More detail on the differences between the CPI and HICP are explained in a document on the CPI methods page.[1]
Why does the basket of goods and services need to be updated?
Consumer preferences are continuously changing. Therefore, in order for the CPI to accurately measure inflation, the goods and services that are included in the CPI basket should reflect these updated preferences. The items in the basket are not meant to cover every item that consumers purchase; however, they should be as representative as possible of what households spend their money on. From December 2016, the number of items in the CPI basket has been reduced from 634 items to 615 items. For a full list of changes to the CPI basket see the document “Changes to the basket of goods and services from December 2016”.
What new items have been included in the basket?
When a new item is included in the CPI basket, this does not imply that consumers previously did not purchase this good or service. It means that the item has become popular enough to warrant inclusion in a sample of representative items. Examples of new products or services included in the basket include fish ready meals & fish products, fresh hake, avocado, melon, sweet potatoes, craft beer, champagne, e-cigarette refills/liquids, ladies trainers & runners, children’s dry haircut, children's activities, e-readers, streaming services and stockbrokers' fees.
What items have been removed from the basket?
There were two reasons why an item was removed from the basket. Firstly, items were removed if they were no longer popular enough to warrant inclusion in a sample of goods and services. Examples of this are fresh whiting, fresh plaice, deep fat fryer, ladies’ two-piece suit, clock radio, home cinema sound system, MP4 docking station, blank CDs, disposable camera, camcorder and library charges. Secondly, items were removed if they belonged to an expenditure category that was over-covered in the basket. Examples of this are matches, clingfilm, carving knife, bottle opener, ironing board, chopping board, sweeping brush, pillow case, tea towel, hammer and screwdriver.
What items have been modified or extended?
During the update of the basket, it is also possible to modify or extend item descriptions to ensure they continue to accurately represent an expenditure category. For example, in the new basket there are two items in the basket that cover the purchase of televisions; TV up to 40" and TV greater than 40". In the previous basket the equivalent items were TV small up to 26" and TV mid-range 32"-42". The item description for potatoes was also amended from a 10kg bag to a 7.5kg bag reflecting feedback from the price collectors on their relative availability. In the area of telecommunications, bundled services have become increasingly popular whereby consumers purchase a package consisting of various combinations of landline telephone services, mobile telephone services, TV subscriptions and broadband. Therefore, the new basket includes an item that covers any two of these services purchased as a bundle and a separate item covers any three of these services purchased as a bundle.
Where does the CSO get the information to update the CPI basket?
Information on consumer preferences was gathered from the CSO’s team of price collectors and research was also carried out by CSO office based staff. However, the Household Budget Survey (HBS) was the most fruitful source of information. The latest HBS was carried out between February 2015 and February 2016 and consisted of a weekly diary of household expenditure and a more detailed survey to capture larger and less frequent purchases.
Why are the CPI weights important?
The CPI weights represent the relative importance of the items in the overall CPI basket – the larger the weight the greater the impact that item will have on the overall rate of inflation. The weight is the proportion of total consumer expenditure spent on an item or category of expenditure. For example the percentage of total household expenditure spent on Food & Non Alcoholic Beverages is approximately 11%.
Were the CPI weights updated as part of the rebase?
Yes, the CPI weights were updated. Since 2012, the weights of the items in the basket have been updated annually using information on consumer expenditure from National Accounts. However, a more granular level update of the weights was possible at the rebase using information from the HBS. For example, in 2016 the weight for petrol at 2.8% was more than double the weight for diesel at 1.3%. However, in 2017 the weights had converged to 2.0% for petrol and 1.9% for diesel due to the availability of more detailed information from the HBS. It should be noted that at higher levels of aggregation the CPI weights continue to be benchmarked to the National Accounts consumer expenditure data. The detailed 2017 weights will be published on the CPI methods page in the near future.
Does the CSO collect prices all over the country?
The CSO has a team of 80 price collectors spread throughout the country. Prices are sorted into five predefined areas; Dublin, South West, Border Midlands & West, Mid-West & Mid-East and South East. Weights are applied to each area to reflect the relative size of consumer expenditure in that region.
Have there been any improvements in terms of how CSO collect consumer prices?
At the rebase, the CPI introduced a new method of data collection by replacing the original handheld devices used by CSO price collectors with modern smartphones and a custom designed application. As part of the implementation, all 80 price collectors attended two training sessions provided by office based staff. The new system allows for data quality checks to be carried out by the price collectors in the retail outlets. This leads to more efficient data collection and higher quality source data.
Have there been any changes to the legislative requirements for HICP?
In 2016, Regulation (EU) 2016/792 [2] on the Harmonised Index of Consumer Prices (HICP) was published which requires the CSO to submit more detailed HICP indices to Eurostat, the statistical office of the European Commission. From January 2017, data will be provided to Eurostat using the ECOICOP classification (European Classification of Individual Consumption according to Purpose). This is a more detailed 5-digit classification compared to the 4-digit COICOP classification that was previously used.
Where can I get more detailed methodological information on the CPI rebase?
There is an extensive range of documents on the CPI methods page (specifically the Methodology Documents section) which provide detailed information on the CPI. A specific document on the 2016 CPI rebase will be published in the coming weeks. This document will be called “CPI - Introduction of Updated Series (Base December 2016=100)” and users will be notified on the CPI monthly release when it is available.