Paul J Crowley Head of Prices & International Relations Central Statistics Office Ireland

Purpose of Presentation 1. To examine the need for an EU wide study of price comparisons 2. If there is such a need – can it be met? 3. Show how a more limited approach worked in the case of Ireland 4. Illustrate what other information is available to consumers 5. Discuss the proposed methods to derive detailed prices 6. Consider the better use of existing data

Detailed Prices 2 Drivers (1) Average price data required for product & market monitoring (2) Publication would serve to improve HICP Communications –> proof official inflation covers products/services people buy However arguments to support these propositions ->weak

Product & Market Monitoring Assumption efficiency of single market -> price convergence However markets are different -> different levels of income -> different levels of direct & indirect taxation -> different standards of living -> different consumer tastes & patterns -> not homogeneous – types/sizes/brands/quality

Product & Market Monitoring Direct comparison – items must be comparable with respect to size, quality, popularity and available in each MS -> examples – Coca Cola, Big Mac, Petrol, Cinema Problems – Clothing – style, quality, brand, outlet Example – cup of coffee (include service charge, table service, 1 cup) €2.26 Austria €0.37 Bulgaria – description is too loose – multiple types

1 st of Experimental Results - HICP ->Data gaps – countries missing ->Issues of comparability ->Range of prices (lowest & highest) ->Unit conversion (KG) – unit but not an average price -> ignores - outlets/tight vs. loose specifications Quality –> data fails to meet the strict requirements Presents more questions than answers Question the validity of results -> ‘meaningless’ & ‘questionable’

Quality & Comparability ‘Comparability is important up to a certain degree….products can be considered sufficiently comparable if they are perceived by consumers as equivalent and substitutable’ -Eurostat Fundamentally disagree with this statement Objective is to compare prices -> prerequisite -measure or compare the same items -> impact on quality/accuracy & reliability

Case Study - Ireland Ireland - island nation separated from rest of Europe But border frontier with Northern Ireland (UK) – cross border trade UK (including NI) main reference wrt price levels – media European prices – holidays (alcohol, eating out)

Ireland -Retail Up to rapid economic growth, growth - employment, incomes, standard of living, influx of UK multiples Media reporting of price comparisons between Ireland ‘south of border’ and NI ‘north of border’ – specifically Tesco which operated north & south – price variation People ‘voted with their feet’ and travelled North Impact – price war, UK sourcing, advertising, cheaper prices

Retail – Other examples (1) UK Multiples £sterling vs. € price £50 - €75 (€55) (2) North South Price Comparisons – Dental/Car Mainten (3) Prescribed Drugs – Spain – National Radio (4) Eating out/Alcohol – holidays – price comparisons

Other sources of information (1) Media – price comparisons – ‘Rip Off culture’ (2) National Consumer Agency – price surveys of supermarkets (3) Revenue Commissioners – north/south survey of alcohol/tobacco/motor fuel – excise duties (4) Private websites – different siteswww.valueireland.ie (5) UBS Prices & Earnings Survey – time per hr (6) Comreg – regulator – (7) AA – petrol & diesel prices – eu comparisons

Role of the HICP Measure the evolution of prices & not to produce absolute measure of average prices Experts (HICP WP) – fundamental issues with use of HICP as the mechanism to create detailed prices Lack of comparability makes it impossible to produce robust, reliable and quality comparisons National Baskets - national competence/national consumer tastes & patterns – not comparable across the entire EU – for neighbouring countries -> virtually impossible to make direct comparison across EU except where product/service is identical e.g. can of Coca Cola

Alternative Sources PPPs - more suitable - significant activity – comparability & represenativity - MS price same or similar ‘representative’ item - results – validation across EU -> But recognise there are difficulties - 3 year cycle/Capitals Integration of PPPs and HICP – difficulties & issues Alternative sources including private sector – resources & cost benefit

Detailed Prices – Are they required? Currently quality data does not exist Is there a perceived or actual need? – who determines this? DG SANCO identifies the need for hundreds of products - this will never be met Danger in ‘contaminating’ HICP by modifying, changing, adding product descriptions – must be reflective of national patterns

Detailed Prices – Are they required? 2 Consumers - ‘passing reference/interest’ but unlikely to travel to Bulgaria to avail of Coffee which is a fraction of the Irish price -> more important is value and price comparisons within the national territory – which supermarket is better value, better choice and has special offers – advertising/own experience Discerning consumer–awareness/shop around –better value

Conclusion Q How much can be achieved by making better use of existing data? -Better use & explanation of PPPs (PLIs) – overall comparison of price levels -Increase understanding of HICP/CPI and maximise use of existing data -Supplement with range of alternative sources (media/www/regulators) Q Integration of HICP/PPPs - No significant value in integration Q When and where can current data collected be supplemented by other sources? - By who, costs & benefits