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

Producer Price Index Manual
O.2.3 Additional sources of weights
1.254 A wide variety of administrative data on
production values may be available from public
agencies charged with regulating or monitoring certain
economic activities. For example, national, regional,
or local governmental bodies regulate many
public utilities, communication, and transport activities.
Typically, these agencies require detailed
annual reports that provide information on production
value and/or turnover. These sources also have
records of all regulated enterprises/establishments,
which can be used as a source for a sampling frame.
1.255 In many countries, data on retail and
wholesale turnover are produced on a regular basis
from separate surveys. Such data, if maintained at a
detailed economic activity level, could serve as a
source of weights for wholesale and retail economic
activities. This, of course, would depend on
whether wholesale and retail trade will be included
in the PPI and if the survey information is deemed
reliable for use as weights.
1.256 Customs records are a source of information
on exports by product and enterprise. If detailed
customs records are maintained and available
for statistical purposes, information on detailed
products by shipping enterprise should be available
and provide a source for weights as well as a potential
sampling frame for sampling export products.
P. Basic Index Calculations
1.257 Chapter 9 provides a general overview of
the ways in which PPIs are calculated in practice.
The methods used in different countries are by no
means all the same, but they have much in common.
There is clearly interest from users as well as
compilers in knowing how most statistical offices
set about calculating their PPIs. The various stages
in the calculation process are illustrated by numerical
examples.
1.258 Chapter 9 is descriptive and not prescriptive,
although it does try to evaluate the strengths
and weaknesses of existing methods. It makes the
point that, because of the greater insights into the
properties and behavior of indices gained in recent
years, it is now recognized that not all existing
practices are necessarily optimal.
1.259 Because the various stages involved in the
calculation process have, in effect, already been
summarized in the preceding sections of this chapter,
it is not proposed to repeat them all again in this
section. However, it may be useful to give an indication
of the nature of the contents of Chapter 9.
P.1 Elementary price indices
1.260 Chapter 9 describes how the elementary
price indices are calculated for the elementary aggregates.
It reviews the principles underlying the
delineation of the elementary aggregates themselves.
Elementary aggregates are relatively small
groups of products that are intended to be as homogeneous
as possible, not merely in terms of the
physical and economic characteristics of the products
covered, but also in terms of their price movements.
They may also be broken down by location
and establishment type. Samples of prices are collected
for a number of representative transactions
across establishments within each elementary aggregate
in order to estimate the elementary price index
for that aggregate, with each elementary price
index providing a building block for the construction
of the higher-level indices.
1.261 Section B of Chapter 9 considers the consequences
of using alternative elementary index
formulas to calculate the elementary indices. It proceeds
by means of a series of numerical examples
that use simulated price data for four different
products within an elementary aggregate. The elementary
indices and their properties have been explained
in some detail in Section I above. An elementary
price index may be calculated either as a
chain index or as a direct index: that is, either by
comparing the price each month, or quarter, with
that in the immediately preceding period or with the
price in the fixed price reference period. Table 9.1
uses both approaches to illustrates the calculation of
three basic types of elementary index, Carli, Dutot,
and Jevons. It is designed to highlight a number of
these indices’ properties. For example, it show the
effects of “price bouncing,” in which the same four
prices are recorded for two consecutive months but
the prices are switched among the four products.
The Dutot and Jevons indices record no increase,
but the Carli index registers an increase. It also illustrates
the differences between the direct and the
chain indices. After six months, each of the four
prices is 10 percent higher than at the start. Each of
the three direct indices records a 10 percent increase,
as also do the chained Dutot and Jevons indices
because they are transitive. The chained Carli,
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