CSO publication, , 11am
The Consumer Price Index (CPI) is the official measure of inflation in Ireland. It measures the change, in index form, in the average level of prices (inclusive of all indirect taxes) paid for consumer goods and services by all private households, institutional settings such as nursing homes in the country, and by foreign tourists holidaying in Ireland. The CPI is a pure price index and therefore measures price change only.
The CPI is the official measure of inflation in Ireland. It tracks the change in prices of a fixed basket of goods and services that are representative of the spending habits of Irish households. The CPI is an important economic indicator which monitors price change in the economy. It also serves as a means of bench marking or setting changes in pay, social welfare, pensions, house insurance, and other contracts. It can also be used to update or determine the value of a sum of money from the past e.g. the equivalent value of £2,000 in 1951 to today’s level. In effect, the CPI shows the change in the value of money over time.
It is worth noting that the Central Statistics Office (CSO) compiles the CPI but does not set or decide the rate of inflation or decide on charges applied to consumers by any service provider.
A rebase is the process where the CPI is updated to reflect (a) changes to the basket of Goods and Services, (b) the introduction of updated item weights based on the latest HBS and CPI sub-index weights based on annual National Accounts data, and (c) the introduction of a new base reference period. It usually happens every five years but was delayed in 2021 due to the COVID-19 pandemic. As of January 2024, the new base period is December 2023=100.
No. The CPI is a pure price index and measures the change in the level of prices of consumer goods and services. A cost of living index includes items such as income levels, taxation, social welfare payments, and substitution between dearer and cheaper goods. This concept would be rather difficult to construct. The change in the level of prices is one of the major determinants of the change in the cost of living and it is only this element that the CPI covers.
Yes. The index is based on the expenditure of average consumers and prices are collected from every county. It doesn’t cover the profile of any one individual or household but is based on the average expenditure profile for the whole country. As such, it represents young and old, rich and poor, urban and rural.
The representative items in the basket are selected based on consumer buying habits using data from the most recent Household Budget Survey (HBS) which was conducted by the CSO in 2022/23.
Up to 2001, the CPI was based on the resident concept - covering all private households in the country. However, the European measure, the Harmonised Index of Consumer Prices (HICP), was based on the domestic concept which also included residents of institutional settings such as nursing homes and foreign tourists on holiday within Ireland. In order to make the CPI and HICP more comparable, the CPI started to move towards the domestic concept in the December 2001 rebase. To achieve this, the expenditure of tourists was included from December 2001, while the expenditure of institutional settings was included from December 2012.
The HICP is the measure of price changes calculated by each Member State of the European Union. The index is based on a harmonisation and standardisation of practices within the EU and the purpose is to allow for the comparison of different consumer price trends in the different Member States. Weighted indices for the EU20 (Euro area) and the EU27 (27 member states) are calculated and published by Eurostat.
Certain items are excluded from the coverage of the HICP, which in essence makes the HICP a subset of the main CPI. The HICP expenditure covers under 96% of the total CPI expenditure and excludes mortgage interest, building materials, union subscriptions, motor taxation, house insurance (dwelling), and the non-service elements of motor and house insurance (contents). In addition, the treatment of insurance (home, health and motor) differs between the CPI and the HICP.
The CPI is the official measure of inflation in Ireland. For intra EU comparisons the HICP, based on harmonised practices, is the more correct measure.
The basket currently covers a range of consumer goods and services. A total of 612 items are included in the basket and these are representative of goods and services typically purchased by the average consumer. The basket is split on the basis of 58% covering Services with the remaining 42% covering Goods.
The weight is the proportion of total expenditure spent on a certain item or category in the overall basket of consumer goods and services. The weight represents the relative importance of an item or category in the overall basket. The larger the weight, the greater the impact on the overall rate of inflation, e.g. Petrol (1.5% of the basket) has a greater impact on inflation than Butter (0.1% of the basket).
The CSO employs price collectors who collect prices from shops and businesses from all counties including Dublin and regional cities as well as smaller provincial towns. This price collection is supplemented by online price collection and transaction data received directly from retailers.
On a monthly basis, approximately 30 price collectors collect prices from over 1,150 retail outlets around the country. Price collectors try to select retail outlets that are representative of the area and cover a mixture of large and small retail outlets. This price collection is supplemented by online pricing that is carried out by staff in the Consumer Price area of the CSO and also by transaction data received directly from larger retailers. In the case of services, a sample of respondents are selected throughout the country as representative of all service providers and are canvassed by the Special Inquiries area of Consumer Prices.
Special Inquiries is the term given to the CSO team who are responsible for CPI postal, e-mail and telephone inquiries, along with internet price collection. Of the 612 items in the CPI basket, 135 are collected under the heading Special Inquiries. These cover a wide range of items such as rents, mortgage interest repayments, prescribed drugs, and most professional services.
Series with different base periods are linked or chained together at the base reference month. For example, Series 1 (base: December 2016=100) links at December 2023 to Series 2 (base: December 2023=100). This produces a continuous series over two periods to December 2023=100 base. This process can be repeated a number of times and the resultant index can be rescaled or referenced to any date within that period.
House prices are not taken into account directly in the CPI but are used to estimate the changing size of the average mortgage. Each month the average mortgage changes in size reflecting the monthly change in house prices. For example, increasing house prices are reflected in the CPI in the form of higher average mortgage interest repayments. The capital cost of purchasing a house is excluded.
The CSO uses a basket of 240 mortgages, reflecting mortgages of different durations and sizes, from the latest mortgage taken out in the past month to one 20 years old. Each month the oldest mortgage is dropped off and the newest mortgage is added to the basket - reflecting the change in house prices. A weighted average interest rate (tracker/variable/fixed), weighted by reference to the market share of each lending institution, is applied to the average mortgage size to estimate the value of mortgage interest repayments for the country.
Discounts are included in the CPI if the offer is non-restrictive i.e. open to the general public with no special conditions and if it does not involve extra expenditure. For example, a special offer of ‘1/3 extra volume free’ would be treated as a price reduction of a third with the return in a subsequent period to its normal size treated as a price increase. But an offer such as ‘buy two and get the third free’ is excluded because it involves additional expenditure.
Yes. The CPI covers all sales with the traditional sale periods being January and July. Following sales, the CPI shows recoveries from sale prices. Items that are marked down a second time are treated as clearance items and are excluded from the CPI.
In direct pricing, over 10,000 prices are collected by price collectors in the field. In addition to this, close to 10,000 prices are collected centrally in office and we also receive data files directly from retailers which contributes to another 20,000 prices. In special inquiries, we collect approximately 3,000 prices.
Price collectors are trained on appointment. When pricing, price collectors record descriptions as well as prices, and price the same item month on month using a mobile application designed for CPI pricing. They use a series of codes to show sales, recoveries from sales, verification of prices and comparable/non-comparable items. When these prices are returned to the CSO, the CPI team check and verify the prices and edit where necessary. Quality checks are also carried out on transaction data from retailers.
No. For certain items such as the price of a pint of stout or 20 cigarettes, a National Average Price (NAP) is calculated and published. This can only be published where the unit of measure is common or standard. In most other cases, the CSO identifies the item to be priced, for example coffee, and the price collector is free to select both the brand and the size so long as they price the same brand and size each month. In this way, we ensure we get many different brands and sizes rather than restricting the price collector to select a fixed item.