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GOVERNMENT OF BERMUDA
Cabinet Off ice
Department of Statistics
Understanding the
Understanding the
Further inquiries about this publication and the Bermuda Consumer Price Index
should be directed to:
The Department of Statistics
Cedar Park Centre
48 Cedar Avenue
P.O Box HM 3015
Hamilton HM MX
Phone: (441) 297-7761
Fax: (441) 295-8390
Website: www.gov.bm
Consumer Price Index numbers are published in the Bermuda Consumer Price
Index Monthly report which is readily available on www.gov.bm.
Detailed technical information about the CPI is available upon request.
Contents
06
Introduction
06
06
09
Price Collection
09
11
15
1.
2.
3.
4.
5.
6.
7.
8.
9.
Food
Rent (Housing)
Clothing and Footwear
Tobacco and Liquor
Fuel and Power
Household Goods, Services and Supplies
Transport and Foreign Travel
Education, Recreation, Entertainment and Reading
Health and Personal Care
The average amount spent by all households in the HES on individual items in
the basket are added to obtain a total cost. Within each of the sectors mentioned
above, the average household spending on similar individual items are grouped. For
example, in the food sector the average amounts spent on bread, rolls, cakes and
biscuits are added. The aggregate amount spent on food by households divided by
the total spending in all nine sectors of the index represents the weight for the CPI
food sector. The following table shows the weighting pattern for the nine sectors.
Sectors
2013 HES
Average Weekly
Expenditure1 ($)
Weights as
Percentages1
(%)
Food
209.83
11.53
Rent (Housing)
486.07
26.71
45.47
2.50
56.60
3.11
71.15
3.91
Household Goods,
Services and Supplies
211.03
11.59
236.73
13.01
Education, Recreation,
Entertainment and Reading
267.17
14.68
236.00
12.97
1,820.05
100.00
Total Expenditure
1
A
verage weekly expenditure and CPI group weights reflect values for the CPI target group of households
and therefore differ from those reported in table A5 of the 2013 Household Expenditure Survey Report.
The weight associated with each sector is calculated by taking the ratio of
expenditure in each sector to total spending of all sectors and multiplying by 100.
For example, the weight for the Rent sector is calculated as follows:
Average weekly expenditure on Rent x 100
Total expenditure (all sectors)
= $486.07 x 100.00 = 26.71%
$1,820.05
Price Collection
The CPI is designed to measure price changes for a fixed basket of goods and
services. Price movements are monitored in many retail stores from which
households do their shopping and also at various types of businesses which
provide services to households. Monthly, quarterly and bi-annual pricing surveys
are carried out at outlets such as: grocery stores, clothing and footwear stores,
furniture and appliance shops, garages, doctors, dentists, law offices, and beauty
and barber salons. Additionally, price data for bus, ferry and taxi fares, telephone
equipment and services and electricity charges, education and hospital fees are
all collected from establishments and government agencies that provide these
services. In total, over 4,065 individual price quotations are either collected and or
reviewed each month to compile the Consumer Price Index.
STEP 1
The Department of Statistics collects prices of different types of baked goods
such as bread, cakes, rolls and biscuits each month from various grocery stores
to obtain an average price that consumers paid for bakery products. The prices are
also reviewed to ensure that they refer to the same quality and quantity of baked
goods observed in the previous month.
STEP 2
A price relative is computed by taking the ratio of the current months average price
and the previous months average price for all bakery products. For example, if the
average price paid for bakery products during January and February was $4.75 and
$4.80 respectively, then the price relative for February is calculated as:
STEP 3
(a) T he price relative is multiplied by the previous months weight for baked goods
to derive the weight for the current period.
Current months weight = 0.77100 x 1.01005
= 0.77875
(b) S
ince the CPI is calculated using a base-weighted formula, the cost of bakery
products in the base period is needed.
Base period weight = 0.70200
(c) The price index number for bakery products is computed as follows:
Current months weight x 100
Base period weight
= 0.77875 x 100
0.70200
= 1.10933 x 100
= 110.93
If the base period were April 2013 and the index number were being calculated for
the current period March 2015, then the index is saying that it costs $110.93 in
March 2008 to purchase the same quantity of bakery products that cost $100 in
April 2013.
STEP 4
Weights and price indexes are computed for each sub-group (meat products, dairy
products, etc.) in the same manner, including prepared meals in the food bought
out sub-group. The current months sub-group weights are summed to obtain the
sector weight; and the index number for the Food sector is calculated using Step 3.
STEP 5
Once index numbers have been derived for each of the nine major sectors of the
CPI, the average price movement for all goods and services in the basket is
computed by taking the ratio of the current months all-items index number and the
index number for the same month in the previous year. This movement or average
change in prices is identified as the All-items CPI and represents the headline
measure of inflation.
2011
2012
2013
2014
2015
January
91.0
93.7
95.5
97.2
98.7
February
91.5
93.7
95.7
97.4
98.9
March
91.4
94.0
96.0
97.9
99.0
April
92.5
94.8
96.5
98.3
100.0
May
92.3
95.0
96.6
98.6
99.8
June
92.5
95.0
96.8
98.6
100.7
July
92.8
95.1
96.8
98.7
100.6
August
92.8
95.6
96.9
99.0
100.4
September
93.9
95.6
97.4
99.7
100.7
October
94.4
96.0
97.5
100.0
100.6
November
93.8
95.6
96.9
99.1
100.5
December
93.6
95.3
97.1
98.7
100.5
Annual Average
92.7
95.0
96.6
98.6
100.0
Nominal
Sales $ 000
Price Index
(2015 = 100)
Constant
Sales $ 000
2011
16,800
92.7
18,123
2012
17,500
95.0
18,421
2013
17,900
96.6
18,530
2014
19,300
98.6
19,574
Examples of the calculations to derive the constant sales for company X for
2011 and 2012 are as follows:
(i)
(ii)
The constant dollar sales values can be used to assess the sales volume for
company X for 2011 to 2014.
Example: A
ugust 2015 the rate of inflation = 1.5%
Weekly wage for electrician = $1,045.00
Adjusted weekly wage October 2015 = $1,045.00 x 101.5
100
= $1,060.67
$50,000 x 98.6 = $50,000 x 1.31642 = $65,821
74.9
This means that $65,281 had the same buying power in 2014 that $50,000
had in 2004.
On the other hand, the question may be reversed. For instance, what sum of
money in 2004 had the same purchasing power as $50,000? The method is
primarily the same with the exception that the base year is reversed to 2014.
Hence, $50,000 x 74.9
98.6 = $50,000 x 0.75963 = $37,982
Thus a total of $37,982 in 2004 had the same purchasing power as $50,000
in 2014. The sum of money is lower because prices were lower in 2004.
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Jan
78.3
80.5
83.7
87.9
89.0
91.0
93.7
95.5
97.2
98.6
Feb
78.5
81.0
83.8
87.5
88.7
91.5
93.7
95.7
97.4
98.9
Mar
78.7
81.5
84.9
87.2
89.2
91.4
94.0
96.0
97.9
99.0
Apr
79.4
81.8
86.2
87.8
90.4
92.5
94.8
96.4
98.3
100.0
May
79.0
82.5
86.4
87.7
90.1
92.3
95.0
96.6
98.6
99.8
Jun
79.8
83.0
86.7
87.7
90.0
92.5
95.0
96.8
98.6
100.7
Jul
79.8
83.3
87.1
88.2
90.2
92.8
95.1
96.8
98.7
100.6
Aug
80.1
83.3
87.4
88.7
90.6
92.8
95.6
96.9
99.0
100.4
Sep
80.5
83.4
88.3
88.5
91.5
93.9
95.6
97.4
99.7
100.7
Oct
80.2
83.7
88.3
89.0
91.7
94.4
96.0
97.5
100.0 100.6
Nov
80.2
84.0
88.3
88.9
91.0
93.8
95.6
96.9
99.1
100.5
Dec
80.6
83.6
87.7
88.6
91.0
93.6
95.3
97.1
98.7
100.5
Annual
Average
Annual
Change
79.6
82.6
86.6
88.1
90.3
92.7
95.0
96.6
98.6
100.0
3.1
3.8
4.8
1.8
2.4
2.7
2.4
1.8
2.0
1.5