Producer Price Index Manual: Theory and Practice ... - METAC

Producer Price Index Manual
cally, on the grounds that the analyst by definition
has no additional information on which to base a
better estimate. While such automatic adjustment
methods are employed, the Manual proposes caution
in their use. If an elementary aggregate is relatively
highly weighted and has a relatively small
sample, an adjustment may be made. The general
prescription should be to include verified prices and
the exception to dampen them.
D.2.2 Treatment of missing price observations
9.180 It is likely that not all the requested data
will have been received by the time the index needs
to be calculated. It is generally the case that missing
data turns out to be delayed. In other cases, the respondent
may report that a price cannot be reported
because neither the product, nor any similar substitute,
is being made anymore. Sometimes, of course,
what started as an apparent late report becomes a
permanent loss to the sample. Different actions
need to be taken depending on whether the situation
is temporary or permanent.
9.181 For temporarily missing prices, the most
appropriate strategy is to minimize the occurrence
of missing observations. Survey reports are likely to
come in over a period of time before the indices
need to be calculated. In many cases, they follow a
steady routine–some respondents will tend to file
quickly, others typically will be later in the processing
cycle. An analyst should become familiar with
these patterns. If there is a good computerized data
capture system, it can flag reports that appear to be
later than usual, well before the processing deadline.
Also, some data are more important than others.
Depending on the weighting system, some respondents
may be particularly important, and such
products should be flagged as requiring particular
scrutiny.
9.182 For those reports for which no estimate can
be made, two basic alternatives are considered here
(see Chapter 7 for a full range of approaches): im-
putation, preferably targeted, in which the missing
price change is assumed to be the same as some
other set of price changes, or an assumption of no
change, as the preceding period’s price is used (the
carry-forward method discussed in Chapter 7).
However, this latter procedure ignores the fact that
some prices will prove to have changed, and if
prices are generally moving in one direction, this
will mean that the change in the indices will be understated.
It is not advised. However, if the index is
periodically revised, the carry-forward method will
lead to less subsequent revisions than making on
imputation, since for most products, prices do not
generally change in any given period. The standard
approach to imputation is to base the estimate of the
missing price observation on the change of some
similar group of observations.
9.183 There will be situations where the price is
permanently missing because the product no longer
exists. Since there is no replacement for the missing
price, an imputation will have to be made each period
until either the sample is redesigned or until a
replacement can be found. Imputing prices for permanently
missing sample observations is, therefore,
more important than in the case of temporarily
missing reports and requires closer attention.
9.184 The missing price can be imputed by the
change of the remaining price observations in the
elementary aggregate, which has the same effect as
removing the missing observation from the sample,
or by the change of a subset of other price observations
for comparable products. The series should be
flagged as being based on imputed values.
9.185 Samples are designed on the basis that the
products chosen to observe are representative of a
wider range of products. Imputations for permanently
missing prices are indications of weakness in
the sample, and their accumulation is a signal that
the sample should be redesigned. For indices where
there are known to be a large number of deaths in
the sample, the need for replacements should be anticipated.
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