Consumers and Food Price Inflation
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Add data series to graph: Line Area Bar Scatter Pie. Solid Dash Dot Dash Dot. Move up Move down. Shaded areas indicate U. Related Resources Education Resource. FRED in the Classroom: While the all-items CPI measures the price changes for all consumer goods and services, including food, the CPI for food measures the changes in the retail prices of food items only. ERS reports the current index level for food, examines changes in the CPI for food, and constructs forecasts of the CPI for food for the next months.
Forecasting the CPI for food has become increasingly important due to the changing structure of food and agricultural economies and the important signals the forecasts provide to farmers, processors, wholesalers, consumers, and policymakers. They are weighted this way: By convention weights are fractions or ratios summing to one, as percentages summing to or as per mille numbers summing to The weights for these sub-indices will consist of the sum of the weights of a number of component lower level indices. The classification is according to use, developed in a national accounting context.
This is not necessarily the kind of classification that is most appropriate for a consumer price index. Grouping together of substitutes or of products whose prices tend to move in parallel might be more suitable.
For some of these lower level indices detailed reweighing to make them be available, allowing computations where the individual price observations can all be weighted. This may be the case, for example, where all selling is in the hands of a single national organisation which makes its data available to the index compilers.
For most lower level indices, however, the weight will consist of the sum of the weights of a number of elementary aggregate indices, each weight corresponding to its fraction of the total annual expenditure covered by the index. An 'elementary aggregate' is a lowest-level component of expenditure, one which has a weight but within which, weights of its sub-components are usually lacking.
Weighted averages of elementary aggregate indices e. Weight averages of these in turn provide sub-indices at a higher, more aggregated level, e. In the case of such products like newspapers in some countries and postal services, which have nationally uniform prices. An example might be an elementary aggregate for sliced bread sold in supermarkets in the Northern region. Most elementary aggregate indices are necessarily 'unweighted' averages for the sample of products within the sampled outlets.
However, in cases where it is possible to select the sample of outlets from which prices are collected so as to reflect the shares of sales to consumers of the different outlet types covered, self-weighted elementary aggregate indices may be computed. Similarly, if the market shares of the different types of product represented by product types are known, even only approximately, the number of observed products to be priced for each of them can be made proportional to those shares. The outlet and regional dimensions noted above mean that the estimation of weights involves a lot more than just the breakdown of expenditure by types of goods and services, and the number of separately weighted indices composing the overall index depends upon two factors:.
How the weights are calculated, and in how much detail, depends upon the availability of information and upon the scope of the index.
Food Price Outlook
In the UK the retail price index RPI does not relate to the whole of consumption, for the reference population is all private households with the exception of a pensioner households that derive at least three-quarters of their total income from state pensions and benefits and b "high income households" whose total household income lies within the top four per cent of all households.
The result is that it is difficult to use data sources relating to total consumption by all population groups. For products whose price movements can differ between regions and between different types of outlet:.
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The situation in most countries comes somewhere between these two extremes. The point is to make the best use of whatever data are available. No firm rules can be suggested on this issue for the simple reason that the available statistical sources differ between countries. However, all countries conduct periodical household-expenditure surveys and all produce breakdowns of consumption expenditure in their national accounts.
The expenditure classifications used there may however be different. Even with the necessary adjustments, the national-account estimates and household-expenditure surveys usually diverge. The statistical sources required for regional and outlet-type breakdowns are usually weak. Only a large-sample Household Expenditure survey can provide a regional breakdown. Regional population data are sometimes used for this purpose, but need adjustment to allow for regional differences in living standards and consumption patterns. Statistics of retail sales and market research reports can provide information for estimating outlet-type breakdowns, but the classifications they use rarely correspond to COICOP categories.
The increasingly widespread use of bar codes, scanners in shops has meant that detailed cash register printed receipts are provided by shops for an increasing share of retail purchases. This development makes possible improved Household Expenditure surveys, as Statistics Iceland has demonstrated. Survey respondents keeping a diary of their purchases need to record only the total of purchases when itemised receipts were given to them and keep these receipts in a special pocket in the diary.
Consumer Price Index for All Urban Consumers: Food | FRED | St. Louis Fed
These receipts provide not only a detailed breakdown of purchases but also the name of the outlet. Thus response burden is markedly reduced, accuracy is increased, product description is more specific and point of purchase data are obtained, facilitating the estimation of outlet-type weights.
There are only two general principles for the estimation of weights: Ideally, in computing an index, the weights would represent current annual expenditure patterns.
In practice they necessarily reflect past using the most recent data available or, if they are not of high quality, some average of the data for more than one previous year. Some countries have used a three-year average in recognition of the fact that household survey estimates are of poor quality. In some cases some of the data sources used may not be available annually, in which case some of the weights for lower level aggregates within higher level aggregates are based on older data than the higher level weights.
Infrequent reweighing saves costs for the national statistical office but delays the introduction into the index of new types of expenditure. For example, subscriptions for Internet service entered index compilation with a considerable time lag in some countries, and account could be taken of digital camera prices between re-weightings only by including some digital cameras in the same elementary aggregate as film cameras. The way in which owner-occupied dwellings should be dealt with in a consumer price index has been, and remains, a subject of heated controversy in many countries.
Various s have been considered, each with their advantages and disadvantages. Leaving aside the quality of public services, the environment, crime and so forth, and regarding the standard of living as a function of the level and composition of individuals' consumption, this standard depends upon the amount and range of goods and services they consume.
These include the service provided by rented accommodation, which can readily be priced, and the similar services yielded by a flat or house owned by the consumer who occupies it. Its cost to a consumer is, according to the economic way of thinking, an "opportunity cost", namely what he or she sacrifices by living in it. This cost, according to many economists, is what should form a component of a consumer price index. Opportunity cost can be looked at in two ways, since there are two alternatives to continuing to live in an owner-occupied dwelling.
One — supposing that it is one year's cost that is to be considered — is to sell it, earn interest on the owner's capital thus released, and buy it back a year later, making an allowance for its physical depreciation. This can be called the "alternative cost" approach. The other, the "rental equivalent" approach, is to let it to someone else for the year, in which case the cost is the rent that could be obtained for it. There are, of course, practical problems in implementing either of these economists' approaches.
Thus, with the alternative cost approach, if house prices are rising fast the cost can be negative and then become sharply positive once house prices start to fall, so such an index would be very volatile. On the other hand, with the rental equivalent approach, there may be difficulty in estimating the movement of rental values of types of property which are not actually rented.