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

Producer Price Index Manual
their design. The price of roads, however, still can
vary considerably because of considerations such as
pavement type, pavement area, location, terrain,
and soil quality.
10.159 The ABS has adopted a method that breaks
down road and bridge construction into a set of
common components. The components and their
weights were derived from an analysis of cost and
tender documentation relating to a selection of representative
main road and highway projects in most
states of Australia. The broad level road construction
components are preliminaries, drainage, earthworks,
pavement and surface, and furniture and
landscaping. The bridge construction components
are piling and columns; substructure, bearings,
girders, and completion of superstructure. Representative
specifications are chosen for these components
and prices are collected on a quarterly basis,
mostly through survey methods.
10.160 The earthworks component has been the
most troublesome because it is a major contributor
to the cost of road construction, but its cost can be
highly variable (and unpredictable) since it depends
on location, terrain, and soil quality. Since the cost
of earthworks is dependent mainly on the use of operated
equipment, hire rates for earthmoving equipment
(inclusive of machine, operator, fuel, maintenance,
overheads, and profit) are being used as a
proxy measure.
I.4 Other nonbuilding construction
10.161 Apart from buildings, roads and bridges, a
diverse range of construction output includes those
associated with telecommunications, electricity
generation, transmission and distribution, railways,
harbors, pipelines, recreation, and heavy industry.
Although the output in these categories can be
unique, like buildings, roads, and bridges, the output
also can be composed of standard components
or processes, suggesting that an index compilation
method that focuses on the pricing of the components
rather than the entire structure can be used.
10.162 The ABS is experimenting with an index
for telecommunications construction in which the
output consists of about two hundred well defined
work activities, grouped into broad categories such
as cable laying, optical fiber cable laying, aerial
works, installation of new telephone services, general
civil works, broadband services, and mobile
networks.
10.163 For electricity-related construction, research
conducted to date has shown that the construction
of transmission and distribution networks
is the most promising in allowing pricing to constant
quality. The construction of transmission and
distribution networks is frequently an ongoing activity,
or at least regular activity, rather than infrequent
or irregular as in the case of generation
plants. As with other areas, more frequent transactions
provide a better opportunity for repeat measurement.
Further, transmission and distribution
networks have some standard elements, such as
towers, lines, and cabling, for which it is more
likely that prices will be collected over time to a
constant quality.
10.164 The ABS has done little work to date on
compiling producer price indices for other components
of nonbuilding construction.
10.165 Currently, in the ABS' Stage of Production
PPIs, the price movements in road and bridge construction
are used to represent those occurring in
other nonbuilding construction. As indices for the
various components of other nonbuilding construction
are developed they will be incorporated. Statistics
Canada currently produces indices for electricity
utilities construction, covering distribution systems
and transmission lines. The indices are compiled
from a combination of output and input prices.
10.166 Aside from the issues mentioned above in
the case of shipbuilding, an issue regarding the pricing
of construction projects is whether to include
the price of land. As mentioned at the outset, activities
that include land development are included in
another ISIC category. One might argue that the
price of a construction project is dependent on the
land, or that the building and the land are bundled
together.
J. Retail Trade, ISIC 52 7
10.167 The primary output of retail trade industries
is the provision of the marketing functions
necessary to allow consumers access to various
goods. In other words, the retailer acts as an intermediary
between goods producers and consumers.
As opposed to wholesale trade industries, customers
7 The details presented in this section were provided by
staff in the Producer Price Program at the U.S. Bureau of
Labor Statistics.
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