Online Program

Sampling and maintaining a fixed and representative basket of goods and services in a dynamic universe
*David Fenwick, Consultant  

Keywords: price indices, dynamic universe, cpi sample

The accuracy and precision of a consumer price index is of great importance to users who require an inflation measure that is free from bias and has a low and measurable variance. Compilers also need measures of accuracy and precision for sample review and optimisation. But to measure on a sample basis the target universe of transactions that make up the coverage of a fixed basket Laspeyres-type index is particularly problematic. The dynamics of the market place represent a major challenge in the statistical measurement of the price evolution of goods and services. In general, the sampling of both outlets and items is purposive and what constitutes the target universe in practice may not be known with certainty and will change over time. There can be a high turnover in the types of products purchased and in the types of outlets from which products are bought. Using illustrative examples, the paper discusses various ways in which the prices data, collected from outlets together with scanner data, can be used to identify imbalances and inefficiencies in the CPI sample and provide solutions that together will lead to a more accurate and precise measure of consumer inflation.