Consumer price index
The Consumer Price Index is used as a principal measure of inflation in Latvia.
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Concepts and definitions
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Concepts and definitions
Consumer prices
Database contains weighted arithmetical average prices of selected consumer goods (mainly food products and selected non-food commodities) which may be easily grouped and described according to common characteristics. Prices of goods wide range of which is offered, are not published, e.g., clothing, footwear, electrical appliances, etc.
The main intention of the price registration is evaluation of price changes during a certain period of time aimed at calculating the CPI.
Qualitative goods with price discounts offered to all buyers are also taken into account in the price registration.
Prices are shown including all taxes.
Consumer price index (CPI)
Consumer price index (CPI) reflects changes in the prices of consumer goods and services in a specified period of time. The CPI measures the average level of price changes in a fixed amount of selected goods and services (the consumer basket). This indicator is used as a principal measure of inflation in Latvia.
The CPI reference period is year 2015, which is expressed by 100 index points (2015 = 100). Price changes during a month, year or any other period are calculated on the basis of price indices. Price indices with the reference periods 2010 = 100, 2005 = 100, 2000 = 100 or December 1990 = 100 are used to calculate price changes over a longer period of time.
CPI is pure price index. It does not reflect the changes in purchasing/ consumption patterns or brands and does not reflect the effect of outlet and service provider substitution.
Consumer price changes, compared to the corresponding period of the previous year (annual inflation)
The consumer price changes compared to the corresponding period of the previous year (annual inflation) reflect the price changes within 12 months. In December of each year the indicator reflects price changes during a calendar year.
This indicator is used in the calculations of social benefits, indexation of wages and pensions, reviewing the lease and rent payments, accountancy, as well as to determine the compensation for material losses to individuals and legal entities (wages and salaries not paid, thefts, accidents, etc.). This measure is responsive to one-off price leaps in comparison or reference periods, however, in general it allows reflecting the most recent price changes better.
Average consumer price changes in last 12 months, compared to the previous 12 months (annual average inflation)
Consumer price changes on average per year (annual average inflation) shows the average price changes in the last 12 months, compared to the previous 12 months.
This indicator is mostly used in the macroeconomic analysis when investigating the inflationary processes in a longer period of time, as it is practically not influenced by short-term or transient price fluctuations.
Consumer price changes, compared to the previous period (monthly inflation)
Consumer price changes, compared to the previous period (monthly inflation) reflect changes in the average price level during a month.
This indicator may be substantially influenced by seasonal price fluctuations.
Impact
The impact calculation is made to assess the degree of influence a specified product or product group has on the overall CPI or to assess the contribution of this product or product group to the overall CPI. The percentage points are used as the measurement unit of the impact calculation.
Products or product groups undergoing insignificant price changes, but having large share in the consumer basket, can influence the overall CPI more than the products having little share in the consumer basket, but undergoing major price changes.
Data collection and statistical processing
Survey method and source data
Sample survey on consumer prices
The prices of all goods and services, except for the prices of fuels for transport, are recorded every month from 4th to 20th date. Fuels for transport prices are recorded from 1st to 25th date. Qualitative goods with price discounts offered to all consumers are also taken into account in price collection. The prices of goods are used to calculate the CPI of the month in which they were observed, whereas the prices of services are used to calculate the CPI of the month in which the consumption of the service at the price recorded can commence.
Price collection is performed by trained CSB employees – price collectors.
To ensure adequate representation of more expensive goods and services, which require larger share of household expenditure, in the overall CPI, the weights representing the proportion of expenditure on each individual commodity to the total household expenditure are computed.
The weights used for index calculation are annual average weights derived mainly from the National Accounts and Household Budget Survey. Additional sources used to calculate the weights include administrative data, branch statistics data, as well as information provided by enterprises and retailers. The weights reference period is the year T-2. The weights are updated annually and price–updated to December T-1.
The outlets, from which prices are collected, are chosen to represent the existing trade and services network, and usually they are based on the three main criteria: popularity among consumers, significant turnover from consumer sales and availability of goods and services included in the CPI basket. The sample of price recording places is regularly updated. If a shop is closed down or liquidated, it is replaced by another shop of an equal significance. The sample also includes open markets.
Statistical population
Population coverage
The CPI covers the whole resident population of the country, including persons living in institutional households (social care institutions, children’s homes, prisons, etc.). The CPI does not cover expenses of non-resident travellers.
Geographical coverage
The consumer price survey is conducted in Riga and 10 other towns. Using population weights survey data are generalized on all country: on both urban and rural territories.
Item coverage
The CPI covers the prices paid for goods and services in monetary transactions. The CPI excludes illegal goods and services, gifts, expenditure on the owner-occupied housing, as well as interest and credit charges.
Sample size
In 2019, the CPI "basket" contains 516 goods and services the prices of which are recorded regularly. Approximately 25 -thousand various trade and services outlets are surveyed. In total, about 20-thousand prices are observed each month.
Average number of prices/ goods and services in consumption groups observed during a month
|
Prices |
Goods and services |
01 Food and non-alcoholic beverages |
6 640 |
129 |
02 Alcoholic beverages and tobacco |
650 |
12 |
03 Clothing and footwear |
2 390 |
65 |
04 Housing, water, electricity, gas and other fuels |
1 360 |
30 |
05 Furnishings, household goods and cleaning |
2 070 |
54 |
06 Health |
1 450 |
34 |
07 Transport |
2 930 |
47 |
08 Communication |
420 |
13 |
09 Recreation and culture |
4 600 |
57 |
10 Education |
180 |
9 |
11 Restaurants and hotels |
700 |
16 |
12 Miscellaneous goods and services |
1 770 |
50 |
Specifications for goods and services under observation are kept unchanged during the whole year.
Statistical processing
Calculation method
At first, the average price of products and services collected in localities is calculated. It is calculated as simple arithmetic mean of the prices of goods and services surveyed. From all the average prices collected in localities, the average price for the whole country of each product and service is calculated using population weights.
Afterwards, the price index of each good and service (lower-level price index) is calculated. Price indices of lower aggregation levels are calculated as the ratio of arithmetic mean prices in the comparison and to that in the reference periods.
For the calculation of higher level (consumer group) price indices and the overall CPI a Laspeyres-type formula that expresses the weighted arithmetic mean value of the lower-level price indices is used:
$I^{T/0} =\sum\limits _{J}$ $w^{0}_{J}$ $*\ I^{T/0}_{J}$ , where
$I^{T/0}$ – the overall Consumer Price Index in the period T, compared to the period 0 (the reference period);
$w^{0}_{J}$ – the share of the product j in the consumer basket in the reference period;
$ I^{T/0}_{J}$ – the price index of the product j in the period T, compared to the period 0 (the reference period).
The reference period used in the CPI calculations is the average value of 2015 (2015 = 100). If December of each year is the linking month, then price index in month m in year G is calculated as follows:
$I^{m,G}_{0} =I^{Dec,0}_{0} *\left(\prod\limits ^{G-1}_{g=1} I^{Dec.g}_{Dec.g-1}\right) *I^{m,G}_{Dec,G-1}$, where
$I^{m,G}_{Dec,G-1}$ – the latest link in the chain (price index in the month of the comparison year, compared to the December of the previous year);
$I^{Dec,0}_{0}$ – the link of the chain, which is calculated from historical data by moving from December as reference period to the average value of the year.
Reference period
The reference period of prices is December of the previous year. To calculate the price changes in a longer time period, the price indices of each year are chained in one time series with the same reference period.
The CPI reference period is the year 2015, expressed by 100 index points (2015 = 100). The price changes during a month, year or any other period are calculated on the basis of price indices. The price indices with the reference period 2010 = 100, 2005 = 100, 2000 = 100 or December 1990 = 100 are used to calculate the price changes over a longer period of time.
Data revision
The published data are final and are not revised.
Classifications
All goods and services of the CPI basket are grouped according to the European Classification of Individual Consumption by Purpose (ECOICOP). The data are published at the level of ECOICOP groups, classes and subclasses.
EICOICOP is available in RAMON classification server.