The new consumer basket as from January 2007

In January 2007, as part of its regular revisions, the CZSO switched to a new consumer basket used to calculate the consumer price index (see Table 1).The selection of the individual items and their weights was revised. The new weighting scheme (constant weights) is based on data on household consumption in 2005; the new base period is December 2005. The revision of the consumer basket has no effect on the inflation data published up until December 2006. When analysing the effects of the switch to the new consumer basket, one has to take into consideration the fact that price movements themselves give rise to continuous changes in the weights of the individual items and expenditure categories for calculation of the index using the Laspeyres index formula (so-called recalculated weights). Compared with the previous revisions (1995 and 2001), the latest revision of the consumer basket can be described as more moderate. This is due both to some stabilisation of consumer habits and to the partial continuous revision of the previous consumer basket and the replacement of its components.


Table 1
The changes in weights reflect developments in the consumption behaviour of Czech households

(COICOP groups; weights in %)

  Constant weights Recalculated weights
Division of 1999 of 2005 in 12/06 in 1/07
  old basket new basket old basket new basket
Total 100 100 100 100
   Food and non-alcoholic beverages 19.8 16.3 18.1 16.4
   Alcoholic beverages, tobacco 7.9 8.2 7.6 8.2
   Clothing and footwear 5.7 5.2 3.7 4.8
   Housing, water, energy, fuel 23.6 24.8 29.0 25.7
   Furnishings, households equipment and maintenance 6.8 5.8 5.3 5.6
   Health 1.4 1.8 1.7 1.8
   Transport 10.1 11.4 9.3 10.9
   Post and telecommunication 2.3 3.9 2.7 3.8
   Recreation and culture 9.6 9.9 9.0 9.8
   Education 0.5 0.6 0.5 0.6
   Restaurants and hotels 7.4 5.8 7.9 5.9
   Miscellaneous goods and services 5.0 6.3 5.2 6.3

The revision of the consumer basket led to a decline in the weights of regulated prices and food prices, while the weights of adjusted inflation excluding fuels and fuel prices increased (see Table 2). Within adjusted inflation excluding fuels the weight of tradable items (expressed in recalculated weights) increased. This change to the consumer basket structure affected the CNB's inflation analysis and forecast both technically and fundamentally. Comparison of the current situation with previous forecasts is not straightforward, since the new consumer basket was not available at the time the forecasts were prepared. According to CNB analyses, the change in the weighting scheme could, other things being equal, lead to rather lower-than-expected headline inflation in the future. The inflation figures for 2007 Q1 are in line with this expectation.

Table 2
The weight of regulated prices in the consumer basket has fallen, the weight of adjusted inflation has risen

(weights in %)

  Constant weights Recalculated weights
Division of 1999 of 2005 in 12/06 in 1/07
  old basket new basket old basket new basket
Total 100 100 100 100
   regulated prices 17.9 16.4 22.2 17.3
   food prices 27.7 24.4 25.7 24.6
   adjusted inflation excl. fuels 51.3 55.1 49.3 54.3
   fuel prices 3.0 4.0 2.8 3.7
   cigarettes 3.3 4.1 3.4 4.2
   net inflation 82.1 83.6 77.8 82.6
   adjusted inflation 54.4 59.2 52.1 58.1
   nontradable other goods 27.2 32.2 31.4 32.5
   tradable other goods 27.2 26.9 20.7 25.6
   tradable other goods excl. fuels 24.2 22.9 17.9 21.8

The change to the consumer basket also evidently gave rise to a change in the relationship between inflation as measured by the national consumer price index (CPI) and inflation as measured by the harmonised index of consumer prices (HICP) as from January 2007. Between 2004 and 2006annual consumer price inflation measured by the CPI was always higher than that measured by the HICP, the average difference being 0.3 percentage point. Higher HICP inflation than CPI inflation has been observed since January (Chart 1). This change in trend is in line with the aforementioned lower CPI inflation caused by the changes to the consumer basket.

zoi April 2007 - box 1 - chart 1