1. 1 Price Statistics Price Statistics Division March 10 th 2010

2. 2 Contents I.Korean Price Index II. Korean CPI III. Korean PPI IV. International comparison

3. 3 I. Korean Price Indexes Consumer Whole Sale Producer Price IndexConsumer Price Index Export and Import Index Purchase and Sales Price Index of Agricultural Households Retail Sale Producer

4. 4 I. Korean Price Indexes  Consumer Price Index The Price Statistics Division, the Statistics Korea (KOSTAT) Measure 489 item prices of goods(329) and services(160) acquired by consumers  Producer Price Index The Bank of Korea Measure 884 item prices of goods(801) and services(83) provided by producers

5. 5 I. Korean Price Indexes  Export and Import Index The Bank of Korea (http://www.bok.or.kr)http://www.bok.or.kr Measure 445 item prices of the exported( 211) and the imported(329)  Purchase and Sales Price Index of Agricultural Households Agriculture and Fisheries Statistics Division, the Statistics Korea (KOSTAT) Measure 398 item prices of the purchased(307) and sale(91)

6. 6 II. Consumer Price Index 1. Usages 2. History 3. Concept and Coverage 4. Items and Weight 5. Price Collection 6. Data Quality Control 7. Statistical Techniques 8. Quality Adjustment Method 9. Data dissemination

7. 7 II. Consumer Price Index 1. Usage  Inflation measurement  Expenditure deflation at current prices or income  Indexation of social security benefit Pension, compensation, reparation

8. 8 II. Consumer Price Index 2. History  Until 1966, the Bank of Korea produced the Seoul Price Index  From 1965, the Korea National Statistical Office (old name of the KOSTAT) started to produce the CPI instead of the Bank of Korea  The KOSTAT has revised the CPI every five years to reflect new consumption patterns

9. 9 II. Consumer Price Index 3. Scope  Consumption Include consumption accompanied by monetary expenditures Exclude social transfers, non-monetary expenditures such as barter transactions, benefit in kind, own-account expenditures

10. 10 II. Consumer Price Index 3. Scope  Households Include single person households or more Exclude households whose primary activity is farming or fishing; such households Exclude institutional households such as nursing home and religious institutions

11. 11 II. Consumer Price Index 3. Scope  Geographical area 38 major cities : 7 metropolitan area and 31 large and medium-sized cities Population in 38 cities were about 81% in 2005 Urbanization rate was 90.5% in 2008

12. 12 CPI’s city (yellow area)

13. 13 II. Consumer Price Index 3. Scope  Outlet and house The PDS collects prices from about 22,500 retail outlets and service establishments Price change of 10,000 households are surveyed for the rental index

14. 14 II. Consumer Price Index 4. Items and Weight  Items and weights are derived from the Household Income and Expenditure Survey (the HIES) conducted in all cities  Revision in every 5 years ending 0 or 5 Items, weight, and cities are changed The current base of the CPI is 2005 The PSD prepares 2010 revision

15. 15 II. Consumer Price Index 4. Items and Weight  Population of weight = average monthly consumption expenditure + imputed rents – contributions – membership fees Exclude religious contributions, other contributions to congratulate and condole such as wedding, funeral, and rites

16. 16 II. Consumer Price Index 4. Items and Weight  The CPI have included 489 items since 2005. Agricultural products, fish and farm products(71 items) Manufactured goods(258 items) Services(160 items)  489 items were classified 12 divisions according to the Classification of Individual Consumption by Purpose (COICOP)

17. 17 GroupsNumber of ItemsWeights 124891000.0 Food and non-alcoholic beverage Alcoholic beverage Clothing and footwear Housing, water and fuels Furnishings and household equipment Health Transportation Communication Culture and recreation Education Eating-out and accommodations Miscellaneous goods and services 131 9 42 19 52 28 31 13 64 23 43 34 140.4 14.6 58.4 170.4 41.7 51.6 109.0 60.2 56.3 110.9 132.7 53.8 II. Consumer Price Index

18. 18 5. Price Collection  Conduct regularly every month  Agricultural product, gasoline, golden ring Three times a month; one day in the week including 5 th, 14 th, and 23 rd  Manufactured goods Once a month; two days in the week including 14 th  Services Once a month; two days in the week including 23 rd II. Consumer Price Index

19. 19 5. Price Collection  Main method is personal visit with PDA Internet, telephone, and fax is allowed  The following irregular prices are excluded Irregular prices caused by natural calamities Special discounted prices for a limited purchaser or members Discounted prices because of bulk package Installment purchases II. Consumer Price Index

20. 20 6. Data Quality Control  Statistics Quality Management Team of the KOSTAT regularly evaluates the data quality of the CPI by outside experts.  Since staff are trained that data quality is the first priority in planning, they faithfully follow this rule in all aspects of their jobs. II. Consumer Price Index

21. 21 II. Consumer Price Index 7. Statistical Techniques  Dutot index in the first level of aggregation the price relative for an item in a city is derived as its average (arithmetic mean) price in the current month divided by its average price (arithmetic mean) in the base year 2005. Products within aggregation are very homogenous because of the same specification

22. 22 II. Consumer Price Index 7. Statistical Techniques  Dutot Index : the ratio of arithmetic mean prices {(6+12+10)/(5+11+10)}= 1.0769  Cali Index : the arithmetic mean of price ratio (6/5+12/11+10/10)/3 = 1.0967  Jevons Index : the ratio of geometric mean prices [(6/5)*(12/11)*(10/10)] 1/3 = 1.0939

23. 23 7. Statistical Techniques  Laspeyres formula in the higher level The Korean CPI is a pure Laspeyres index because the weight period and the price reference period are the same Lowe formula II. Consumer Price Index

24. 24 II. Consumer Price Index 7. Statistical Techniques  Laspeyres formula

25. 25 7. Statistical Techniques  Temporarily unavailable product Its price is imputed by the price movements of similar products for the same item in the same geographic area  Seasonal items If they are not available on the market during the off-season, the last available prices are used to calculate the index until new prices are available II. Consumer Price Index

26. 26 8. Quality Adjustment Method  To adjust for quality differences, an appropriate method from a variety of quality adjustment techniques is used depending on the circumstances : the direct comparison method, expert judgment, quantity adjustment, production cost/option cost, linking or splicing to show no price change, hedonic regression techniques II. Consumer Price Index

27. 27 8. Quality Adjustment Method  The direct comparison This approach is applied when the quality of an old item and a new item is the same II. Consumer Price Index Tooth- Paste ItemIndex Percent change OldNewOldNew Brand name AceAce+ 1,000Won (100.0) 1,100Won (110.0) 10.0

28. 28 8. Quality Adjustment Method  Expert judgment This method involves the calculation of the pure price element of the nominal price change It is for household appliances whose characteristics and functions are frequently modified to reflect improvements and the adoption of new technology II. Consumer Price Index

29. 29 8. Quality Adjustment Method  Quantity adjustment This method involves scaling the price of the old item, or the new item, by the ratio of the respective quantities II. Consumer Price Index Snack ItemIndex Percent change OldNewOldNew Digest100g90g 1,000Won (100.0) 1,000Won (111.1) 11.1

30. 30 8. Quality Adjustment Method  Hedonic regression techniques These methods are used when the all the major characteristics of the item that influence its price change can be obtained. The PSD has applied the hedonic approach to desk computers and notebook computers since 2005. II. Consumer Price Index

31. 31 9. Data dissemination  The first business day of the next month  In advance, the dates when the CPI is to be released are announced in the January news release The CPI is released punctually according to the preannounced schedule II. Consumer Price Index

32. 32 9. Data dissemination  Supplementary index CPI excluding agricultural products and oils CPI including owner occupied equivalent rent Yearly Chain index  English news release is also published on the Web site of the KOSTAT (http://kostat.go.kr)http://kostat.go.kr II. Consumer Price Index

33. 33 II. Consumer Price Index Korean CPI (2005 =100) Manufactured goods Agricultural products Headline CPI Financial Crisis

34. 34 2. Consumer Price Index III. Produce Price Index  The Bank of Korea  Barometer of the price level of commodities and services transacted in domestic primary markets  Data collection Agricultural products: Three times a month Commodity and Services: Once a month

35. 35  PPI covers all goods and services produced by domestic enterprises in the selected sectors which were sold to domestic markets in 2005  It excludes exports and imports which are covered by the Export and Import Price Index. III. Produce Price Index

36. 36 2. Consumer Price Index III. Produce Price Index  PPI collects the prices of 884 items  Commodity : 801 items Amount of business value exceeds 1/10,000 of the universe  Service : 83 items The output value for domestic use exceeds 1/2,000 of the universe

37. 37 III. Produce Price Index  Laspeyres formula with 2005=100  Various quality adjustment method are applied  Revision every five years ending 0 or 5  News is monthly released in the early of the month

38. 38 CPIPPI ItemWeightItemWeight Total489(100.0)1000.0884(100.0)1000.0  Commodity - Agr. product - Man. product  Service 329(67.3) 71(14.5) 258(52.8) 160(32.7) 395.8 88.4 307.4 604.2 801(90.6) 55(6.2) 746(84.4) 83(9.4) 735.6 43.6 692.0 264.4 CPI and PPI III. Produce Price Index

39. 39 IV. International Comparison  Countries that subscribe to the IMF's General Data Dissemination System Site (GDDS) http://dsbb.imf.org/Applications/web/gdds/gddscountryl ist http://dsbb.imf.org/Applications/web/gdds/gddscountryl ist  Countries that subscribe to the IMF's Special Data Dissemination Standard (SDDS) http://dsbb.imf.org/Applications/web/sddscategorycount rylist/?strcat=CPI00&strcatname=Price%20index:%20 Consumer%20prices http://dsbb.imf.org/Applications/web/sddscategorycount rylist/?strcat=CPI00&strcatname=Price%20index:%20 Consumer%20prices

40. 40 IV. International Comparison  ILO CPI Manual: Theory and Practice(2004) http://www.ilo.org/public/english/bureau/stat/guides/cpi/in dex.htm http://www.ilo.org/public/english/bureau/stat/guides/cpi/in dex.htm

41. 41 Thank you for your attention & Welcome any question