3 Presentation on Price Statistics by Federal Bureau of Statistics.ppt

Price and inflation

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2. 2
WHAT IS PRICE?
Determination of value in terms of money is called
price.
Price reflects scarcity of a commodity in relation to
its demand.

3. 3
WHY OBSERVE PRICE CHANGES
Observing prices in absolute terms for administering
them.
Monitoring inflation at an aggregated level of commodities
(“price indices”):
Curbing undesired inflation as a matter of monetary or
economic policy.
Using price indices for deflation of macro-economic
aggregates.
Price escalation clauses for tariffs & contracts.
Enabling international price comparisons.

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TYPES OF PRICES
Producer Price: Prices determined at factory gate.
Wholesale Price: Producer price + transport charge
+ taxes + profit margin + middleman charges if any.
Retail Prices : Wholesale prices+ transport charge
+ taxes + profit margin + middleman charges if any

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RELEVANT TYPES OF PRICE INDICES
Consumer Price Index (CPI)
Sensitive Price Indicator (SPI)
Producer Price Index (PPI)
Wholesale Price Index (WPI)
Unit values
Measures of core inflation (CPI)

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MAIN PROCESS FOR DEVELOPING PRICE
INDICES
Family
Budget
Survey Fixation of Basket of
Goods & Services
Derivation of Weights
Selection of Cities
Selection of Markets
Approval
of
Group
of
Experts
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CPI: characteristics
oThe main measure of price changes at the retail
level.
oMeasures changes in the cost of buying a
representative fixed basket of goods and services
oIndicates inflation rate in the country.
oPrices are collected from retail stores and service
establishments.
oThe prices constitute the once charged directly to
the consumers.
oThus, FBS collects transaction prices as against
list or tag prices fixed by the manufacturers or
various price-monitoring agencies.

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We are measuring the inputs entering the private
households for consumption purpose.
We interview the households to sound out the
patterns of consumption (weighting scheme).
But for measuring the prices over time we go the
easier way and ask the retailers.
In contrast to that a retail price index would be an
output index which covers all retail transactions,
including those which do not constitute private
consumption.
CPI is an input price index

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FIXATION OF BASKET OF GOODS & SERVICES
i) Food & beverages
ii) Apparel, textile & footwear
iii) House rent,
iv) Fuel & lighting
v) Household, furniture & equip. etc.
The current CPI covers 374 items. The basket of goods and services comprise
10 major groups
vi)Transport & communication
vii) Recreation & entertainment
viii)Education
ix) Cleaning, laundry & personal app.
x) Medicare
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DERIVATION OF WEIGHTS
P
ox q
o
Wi = Weight of the item in the base period = -------------
∑ P
ox Q
o
Where P
0=Price and Q
0=Quantity in base period
Family Budget Survey provides the details of commodity-wise
expenditure of households of different income groups.
Weight of a commodity is average percentage expenditure by
households on a commodity.
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SELECTION OF CITIES
i) large cities having
population ≥ 500,000
ii) medium cities having
population 100,000 to
500,000
All the urban centres have been divided into 4 groups
iii)small cities having
population 50,000 to
100,000
iv) additional small cities
(one from each
province) with
population < 50,000
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INCOME GROUPS
i) Up to Rs. 3,000
ii) Rs. 3,001 to 5,000
iii) Rs. 5,001 to 12,000
iv) Above Rs. 12,000
The current CPI covers the four income groups viz.
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Strata-I Strata-II Strata-III Strata-IV
City Mark
-ets
City Mark-
ets
City Mark-
ets
City Mark-
ets
1-Islamabad 041-Jhelum 011-Mianwali 011-Samundri 01
2-Rawalpindi062-Sialkot 012-Attock 012-Kunri 01
3-Lahore 073-Sargodha 013-Vehari 013-Bannu 01
4-Gujranwala014-Jhang 014-Shahdadpur 014-Loralai 01
5-Faisalabad025-Okara 015-D.I.Khan 01
6-Multan 036-D.G.Khan 016-Khuzdar 01
7-Karachi 137-Bahawalpur 017-Turbat 01
8-Hyderabad 048-Bahawalnagar 01
9-Peshawar 039-Sukkur 02
10-Quetta 0210-Nawabshah 01
11-Larkana 01
12-Mirpurkhas 01
13-Mardan 01
14-Abbottabad 01
Total Markets = 71
SELECTION OF MARKETS (CPI/SPI)
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Note: The cities highlighted with red colour are covered in SPI.

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1.Collection of Prices
2.Averaging collected prices
3.Computation of Price Index
METHODOLOGY
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Four quotations of price of each item are collected in one market.
As CPI covers 71 markets
Therefore, the total number of quotations for one items
71 x 4 = 284
And the total number of quotations for 374 items
374 x 71 x 4 = 106,216
SPI covers 53 markets
Therefore, the total number of quotations for one item
53 x 4 = 212
And the total number of quotations for 53 items
53 x 53 x 4 = 11,236
COLLECTION OF PRICES
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•Four quotations of price of each item are collected in one
market and simple average of these four quotation of prices
of each item are taken as average price of the item in that
market.
•Then the average prices of all markets in the city are
averaged at city level.
•The average prices of all 35 cities (CPI) and 17 cities (SPI)
are again averaged at National level.
COMPUTATION OF AVERAGE PRICES
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Laspeyre’s formula is being used for the computation of Price Indices which is as
follows:
(Pn/Po) x Wi
In = ------------------X 100
Wi
WhereIn = Index for the nth period
Pn = Price of an item in the nth period
Po = Price of an item in the base period
Wi = Weight of the ith item in the base period
Wi = Total weight of all items
(Pn/Po) x Wi = Total of weighted price relatives
FORMULA FOR PRICE INDEX
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Item Unit
Price on
Weight
PR (Col3/
Col4)
WPR (Col 6
x col5)
04.09.08Base year
Pn Po
1 2 3 4 5 6 7
MASOOR PULSE Kg. 122.60 36.97 0.5377
3.3162 1.7831
MOONG PULSE Kg. 55.01 29.89 0.5174
1.8404 0.9522
MASH PULSE Kg. 75.02 46.47 0.4912
1.6144 0.7930
GRAM PULSE Kg. 64.12 29.32 1.0302
2.1869 2.2529
Total 2.5765 5.7812
PR = Price Relative
WPR = Weighted Price Relative
COMPUTATION OF A PRICE INDEX –AN
ILLUSTRATION
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(Pn/Po) x Wi
SPI = In = ------------------X 100
Wi
(Pn/Po) x Wi = 5.7812
Wi = 2.5765
5.7812
SPI = In = ------------------X 100
2.5765
SPI = 224.3819
COMPUTATION OF A PRICE INDEX -ILLUSTRATION
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Sensitive Price Indicator (SPI)
Sensitive Price Indicator (SPI) is
designed to assess price movement of
essential consumer items at short
intervals (on weekly basis) so as to take
corrective measures.

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WHOLESALE PRICE INDEX (WPI)
Wholesalepriceindex(WPI)isdesignedtomeasurethe
changeofpriceintheprimaryandwholesalemarkets.It
coverspreciselydefinedcommoditiesofferedinthelots
byproducer/manufacturerstosuppliers/primarysellers.
Pricesusedaregenerallythoseatwhichprimaryselling
istransactedatex-mandi,ex-factoryoratanorganized
wholesalelevel

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WHOLE SALE PRICE INDEX (2000 -01)
Coverage:
 Commodities: 106 Items 425 Price Quotations 1550
 CITIES:- 18 Major Cities
 1. Lahore 2. Faisalabad 3. Rawalpindi 4. Multan 5. Gujranwala
 6. Sialkot 7. Sarghoda 8. Bahawalpur 9. Sahiwal 10. Karachi
 11. Hyderabad 12. Sukkur 13. Nawabshah 14. Larkana
 15. Peshawar 16. Quetta. 17. Mirpurkhas 18.Mingora
GROUPS & WEIGHTS: -
 Commodity Group Weight No. of Items No. of Commodities No. of Price
 Quotation
 FOOD 42.12 106 43 693
 RAW MATERIALS 7.99 25 09104
 FUEL, LIGHTING
 & LUBRICANTS 19.29 17 11 36
 MANUFACTURES 25.87 227 32 564
 BUILDING
 MATERIALS 4.73 50 11 153
 TOTAL 100.00 425106 1550
PERIODICITY OF PRICE COLLECTION: -11th to 14th of Each Month (Monthly)

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Thanks
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