CSO publication, , 11am
The CPI measures the change in the cost of a representative basket of goods and services. This involves weighting together aggregated price indices for different categories of goods and services so that each takes its appropriate share within household budgets. For instance, as most people spend far more on electricity than on processed fruit, a price rise for electricity must have more effect on overall price rises than a similar-sized increase for processed fruit. At the lowest level therefore, each elementary aggregate (see section 6.2.1) should receive a weight equal to the proportion of total expenditure by households on goods and services represented by that aggregate.
Since 2012 these weights are updated annually using National Accounts data, in particular the Household Final Monetary Consumption Expenditure (HFMCE) data.
Household Final Monetary Consumption Expenditure (HFMCE) is expenditure made by households on goods or services for the direct satisfaction of individual needs or wants. It concerns that part of final consumption expenditure which is by households, irrespective of their nationality or residence status, in monetary transactions, on the economic territory of Ireland, on goods and services that are used for the direct satisfaction of individual needs or wants.
Some adjustments were made to this data. For example, estimates of the average household expenditure on tourism expenditure (i.e. package holidays, airfares, and boat fares) were adjusted with reference to estimates based on the results of the latest Household Travel Survey (HTS).
The adjusted HFMCE data for 2022 were then updated for price changes up to mid-December 2023 using the percentage changes between 2022 and mid-December 2023 in the indices at 4-digit COICOP level. These updated HFMCE data were then used to allocate December 2023 CPI weights at 4-digit COICOP level.
We then supplemented this National Accounts data with data from the 2022/23 Household Budget survey.
The HBS is a survey of the expenditure patterns of private households based on a representative sample of around 10,000 households. It is currently conducted by the CSO every five years primarily for the purpose of updating the weights used to compile the CPI. The latest HBS undertaken by the CSO refers to the period 2022/2023.
Using up to date expenditure data ensures that the indices remain representative of current expenditure patterns. Updating is also necessary so that the weights reflect the introduction of new items and the deletion of those items no longer representative.
The sample of households, which participated in the survey provided particulars of household composition, accommodation, facilities and regular household expenses (e.g. rent, electricity and gas expenses, etc.). Individual household members aged fifteen years and over also provided details of their income and regular personal expenditure (e.g. motor car insurance premiums, motor tax, etc.), and maintained detailed records of their day-to-day expenditure over a period of fourteen consecutive days.
The responses from individual households were compiled to give overall average household expenditure for the State for a detailed list of expenditure headings. This data was used to determine the proportion of the weight to be allocated to the items within each 4-digit COICOP. Each CPI item heading was given an integer weight in parts per hundred so that the sum of the division weights is 100 (see Appendix 3).
Example: The 2022 HFMCE figure for COICOP 01.1.1 (Bread and Cereals) was €1.559 billion. When this and the other 4-digit COICOP figures were price updated to December 2023, this resulted in a CPI weight (December 2023) of 1.74% of the overall basket for COICOP 01.1.1. The relative weights at item level were then determined using HBS 2022/23 data, which showed that of spending on Bread and Cereals, 4.6% was on rice, 2.2% was on flour and other cereals, and so on. So the resulting item weights (December 2023) are 1.74% * 4.6% = 0.08% for rice and so on.
The weights at 4-digit COICOP will be updated each year based on the most recent HFMCE data. The proportions at item level will stay constant until the next rebase and HBS survey. So for example the weight for rice will continue to stay at 4.6% of the annually updated weight for Bread and Cereals until the next rebase.
Source weights are used in the compilation of the CPI. Previously area weights, based on the Census of Population were used, however with the increase in the number of sources and the decrease in the number of price collectors in the field, it was determined that moving to source weights was the better option.
Each item in the basket is given a weighted average price based on the source it is collected from. For example, rice is given a weighted price based on the value of sales in the scanner data files received as well as in store pricing. Other items such as women’s clothing are only collected online in the CSO offices and the full weight of the price is assigned to this price collection source.