Food Price Index Series 2011

Sample size About 22,000 prices were collected from 650 retail outlets.

Imputation Due to being unavailable at the time of price collection, on average 0.7 percent of prices (not including seasonal fresh fruit and vegetables) are imputed each month by carrying forward the previous month’s price.

Reference population The reference population of the FPI covers approximately 98 percent of the usually-resident New Zealand population living in permanent dwellings. There are no exclusions based on income source or geographic location.

Expenditure weights Expenditure weights give the relative importance of the food goods and services in the FPI basket. The FPI represents about $16.9 billion spent on food goods and services by New Zealand households each year (at June 2011 month prices). This is based on information from the2009/10 Household Economic Survey and other sources. New Zealand households spent $15.7 billion on food goods and services in the year to June 2010 (which is the latest period available). Once the effect of price change between the year to June 2010 and the year to June 2011 is taken into account (called ‘price updating’), spending on food rises to $16.9 billion. The relative importance of the FPI subgroups shows that about $38 of every $100 households spend on food is spent on grocery food. About $21 is spent on eating out or takeaways, and about $16 is spent on meat, poultry, and fish. Fruit and vegetables account for $14, and the remaining $11 is spent on non-alcoholic beverages, such as packaged coffee, soft drinks, and juices. More information on the relative importance of FPI subgroups, classes, and selected sections is in table 6 of this release. Collection methods Prices are surveyed by visiting retail outlets in 15 urban areas: Whangarei, Auckland, Hamilton, Tauranga, Rotorua, Napier-Hastings, New Plymouth, Wanganui, Palmerston North, Wellington, Nelson, Christchurch, Timaru, Dunedin, and Invercargill. Fresh fruit and vegetable prices are surveyed weekly, and the remaining food prices are generally surveyed between the 8th and 16th day of the month, although sometimes surveying starts and finishes earlier or later.

Sample design Food prices are collected from about 650 outlets in the 15 surveyed urban areas. Of these, about 70 are supermarkets, 30 greengrocers, 30 fish shops, 30 butchers, 50 convenience stores (with half being service stations and the other half being dairies, grocery stores, and superettes), 120 restaurants (for evening meals), and more than 300 other suitable outlets (for breakfast, lunch, and takeaway food). Statistics New Zealand collects prices from a sample of supermarkets in each of the 15 FPI pricing regions. This sample is designed to be representative of household purchases in each region. It was last reviewed in 2011. The sample of other stores was last reviewed in 2006.

Accuracy of the data Review of the food price index Reviews of the FPI are undertaken every three years, as part of wider reviews of the consumers price index (CPI). The latest review was implemented with the publication of the July 2011 FPI. The review involved reselecting the basket of representative food goods and services, calculating new national expenditure weights, and updating regional population weights. The previous product sample’s final price collection period was June 2011. The updated FPI sample of products also had prices collected in June 2011. An overlapping price collection is necessary when changing a price index, to ensure changes in basket composition (eg basket additions, different outlets) are not reflected as price changes. See food price index review: 2011 for more information.

Population weights Population weights are used to allocate the national expenditure weights of goods and services to the FPI pricing centres. For example, the population weights ensure that a price change in Auckland (which has 33.43 percent of the population weight) would have about three times the effect on the national FPI than the same price change in Wellington (which has 11.07 percent of the population weight). The latest subnational population estimates, which are published annually, are used to calculate the population weights at each FPI review. Estimates at 30 June 2010 were the latest figures available at the time of the 2011 FPI review. This means that any potential population movements following the Christchurch earthquakes in 2010/11 are not reflected in these weights. Population weights will be monitored, and if considered necessary, updated to maintain the accuracy of the FPI. Statistics NZ publishes FPI and CPI price indexes for five broad regions based on regional council area boundaries. These indexes are available from Infoshare. These regions are Auckland, Wellington, rest of North Island, Canterbury, and rest of South Island. For the population weights of each region in the FPI, see table 7 of this release.

Outlet weights Outlets are given appropriate weights to reflect their relative importance in terms of household spending.

Elementary aggregate formulae Regional elementary aggregates are calculated for each of the 15 pricing centres from all prices collected for an item within that region. Regional elementary aggregates are calculated using a 'geometric mean of price relatives', or Jevons formula. The Jevons formula is used to calculate average prices for all food goods and services in the basket, except fresh fruit and fresh vegetables. The Jevons formula assumes that households spend the same amount at each surveyed outlet in each period. This implies that increased quantities are purchased from outlets showing lower-than-average relative price change and decreased quantities from outlets showing higher-than-average price change. The calculation of fresh fruit and vegetable average prices uses the Dutot formula. Information about the Food Price Index gives more information on the Jevons and Dutot formulae (see elementary aggregate formulae).

'On special' prices Items that are 'on special' are included in the FPI at the price levels observed at the time of price collection. Quantity specials (for example, three loaves of bread for $5.00) are also taken into account (as the price per loaf for the special is usually lower than the price of a single loaf). Where discounted prices are available only to customers who belong to discount schemes, this is represented in the FPI by collecting these prices at some outlets within a region, but not others.

Consistency with other periods or datasets Impact of the Christchurch earthquakes on price collection Following the Christchurch earthquake on 22 February 2011 price movements for the rest of New Zealand were used to calculate price movements in Christchurch for the March FPI. In June 2011, about half the prices used to calculate the June 2011 FPI had been collected before the 13 June earthquakes, collection was completed on 20 and 21 June, two working days later than other regions where we collect prices for the FPI.

Index reference The FPI has an index reference period of the June 2006 month (=1000). This is the benchmark to which prices in other periods are compared (eg if the index number in a later period is 1150, prices have increased by 15.0 percent since the index reference period). Prices for later periods can also be compared in the same fashion.

Seasonal adjustment of prices - fresh fruit and vegetables Until the June 2006 month, fresh fruit and vegetable items that exhibited a seasonal pattern were adjusted to remove the effect of normal seasonal change. From the July 2006 month onwards, the FPI incorporates seasonally unadjusted prices for fresh fruit and vegetables. This change is in line with a recommendation made by the 2004 CPI Revision Advisory Committee. The ongoing, fully unadjusted FPI is linked at the June 2006 month to the previously published FPI, which is partly seasonally adjusted. As such, care is required when comparing annual movements over this transition period. Annual movements calculated over the annual period encompassing the June 2006 month were based on fully unadjusted index numbers for the latest month, compared with adjusted index numbers for fresh fruit and vegetables for the same month of the previous year.

Reconciling the FPI and food group of the CPI When comparing the FPI and the food group of the CPI, strictly speaking, the quarterly food group index number is not the average of the relevant three monthly FPI numbers. There are some technical differences between the monthly FPI indexes and quarterly indexes.

Interpreting the data Seasonal availability of fruit and vegetables Fruit and vegetable prices are reflected in the FPI when there is enough produce available to estimate representative average prices. For example, prices for nectarines are historically not included in the April and May FPI. Similarly, prices for strawberries are not included in the May and June FPI. This is because not enough prices can be collected from stores during these months. No price change is shown in the FPI for these items during these months. When produce returns to sufficient levels, the prices are again reflected in the FPI. Price movements then reflect the price change from the month that the item was last included to the current month.

Weighted average retail prices of selected food items Table 3 contains a selection of weighted average retail prices for the current and previous months. These weighted average retail prices were calculated from prices collected in the June 2006 month. Subsequent months' weighted average prices are then calculated by applying price index movements for the relevant items. These are not statistically accurate measures of average transaction price levels, but are reliable indicators of percentage changes in prices increased by 15.0 percent since the index reference period. Prices for later periods can also be compared in the same fashion.

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