Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698754365594.pdf (Saint Vincent and the Grenadines)
PUBLISHED & PRINTED BY STATISTICAL OFFICE CENTRAL PLANNING DIVISION MINISTRY OF FINANCE AND ECONOMIC PLANNING KINGSTOWN, ST. VINCENT AND THE GRENDINES Telephone: (784) 457-2921 Fax: (784) 456-2430 E-mail: svg.stats@mail.gov.vc Website: © COPYRIGHT 2010 DATA FROM THESE TABLES MAY BE REPRODUCED WITH ACKNOWLEDGEMENT FROM SOURCE TABLE OF CONTENTS FOREWORD ...................................................................................................................................... 1 ACKNOWLEDGEMENTS .................................................................................................................... 2 SELECTED ACRONYMS ...................................................................................................................... 3 I.
INTRODUCTION ......................................................................................................................... 4 II.

WHY A NEW CONSUMER PRICE INDEX?

............................................................................... 5 III.

MAIN FINDINGS OF THE HBES ............................................................................................... 6 IV.
IMPROVEMENTS TO THE NEW CONSUMER INDEX ............................................................... 7 V. CONSUMER PRICE INDEX PROCESSES ................................................................................. 11 THE DEVELOPMENT OF THE CPI ....................................................................................... 11 CPI WEIGHTS ................................................................................................................ 13 PRICE COLLECTION ............................................................................................................ 19 VI.
SOURCES AND METHODS .................................................................................................... 22 COMPUTATION OF THE CPI .............................................................................................. 22 MATCHED PRICE OBSERVATIONS AND IMPUTING MISSING PRICES ................................ 24 IMPUTING MISSING INDEXES ........................................................................................... 24 DETECTION OF OUTLIERS .................................................................................................. 25 METHOD OF USING Z-SCORES .......................................................................................... 26 BOX PLOTS METHODS ....................................................................................................... 26 LOG-NORMAL METHOD .................................................................................................... 27 VII.
APPLICATION OF THE CONSUMER PRICE INDEX ................................................................. 28 COMPUTATION OF AVERAGE PRICES ............................................................................... 29 VIII.

CONCLUSION ....................................................................................................................... 33 i TABLES AND CHARTS Table Index.
Page 1.0 COICOP Division with Examples of Items in Each Category 2.0 Summary of Divisions by Annual Expenditure and Weight14 3.0 4.0 5.0 Comparison of Current and Revised Weights on the COICOP Structure (Expenditure Shares Comparison of St. Vincent and the Grenadines Weights with other ECCU countries by COICOP Division 2010 =100 Classification, Weight, Number of Items and Outlets in the New Consumer Price Index, 2010 =100 6.0 Classification, Weight, Number of Items and Outlets in the Old Consumer Price Index, 2001 = 100 7.0 Purchasing Power of EC$100.00 (2005 – 2009) 8.0 Computation of average prices Using Arithmetic and Geometric Mean 9.0 Changes in the Consumer price Index Over the Past Three (3) Years 10.0 Average Retail prices of Selected Items for the Period 2002 – 2009 Chart Index 1.0 Structure of the New CPI Basket 2010=100 1.1 Structure of the Old CPI Basket 2001 = 100 Box Index 1 2 Key features of the Revised Consumer price Index Geometric Average Formula (Jevons) 3 Geometric Average Formula ( Cobb- Douglas) ii 12 16 18 20 21 28 29 30 31 15 15 7 22 23 FOREWORD The “Consumer Price Index 2010” is the first publication on the sources and methods for compiling the Consumer Price Index, produced by the Staff of the Economic Statistics Unit, Statistical Office, Central Planning Division, Ministry of Finance and Economic Planning (MFEP).
The objective of this report is to provide government planners, policymakers, business enterprises, academics and the general public with information on how the Statistical Office measures price movements that are the primary cause of inflation in St Vincent and the Grenadines.

The statistics contained in this report are in accordance with the standard methodology adopted by the Eastern Caribbean member countries and is consistent with the recommendations of the 2004 Consumer Price Index Manual .
This publication reports on the outcome of the updating and rebasing St Vincent and the Grenadines Consumer Price Index from base year 2001 to base year 2010.
The revising of the consumer price index series incorporated new data sources, and adopted new international methodological and classification standards This report includes sections describing the sources and methods used to derive the Consumer the Consumer Price Index (CPI) and inflation rate which provides a guide to data users on the compilation and estimation process.
It presents tables and charts on the CPI that are based on the Classification of Individual Consumption by Purpose (COICOP) and compare the current and revised weights of the CPI basket.

It also provides average retail prices for selected items of the CPI basket.

The Statistical Office recognizes and commends the tremendous efforts of the staff of the Economic Statistics Unit and those who collected the prices and their unwavering commitment in bringing this updating exercise to a successful completion.
The tables and charts presented in this report should prove useful in analyzing the performance of economy.

Any suggestions for improvement, comments or queries may be directed to the Statistical Office, Central Planning Division, Ministry of Finance and Economic Planning .
Gatlin Roberts Chief Statistician The Statistical Office Central Planning Division Ministry of Finance and Economic Planning Page - 1 ACKNOWLEDGEMENTS The Statistical Office wishes to thank the business community, public corporations, government agencies, and everyone, who has contributed, in one way or another, to facilitate the completion of this report.
The production of Consumer Price Index report depends on a large set of data gathered from selected establishments and specially designed surveys, all of which involve the participation of a myriad of persons and institutions.

The Statistical Office looks forward to your continued support.
The Statistical Office would like to acknowledge the significant contribution and the overwhelming support of Dr. Paul Armknecht, Statistics Adviser of the Caribbean Regional and Technical Assistance Centre (CARTAC), whose commitment cannot be over emphasized.
Page - 2 SELECTED ACRONYMS CARTAC Caribbean Regional Technical Assistance Centre CDs Census Divisions COICOP Classification of Individual Consumption by Purpose CPI Consumer Price Index CPI Manual Consumer Price Index Manual: Theory and Practice, 2004 ECCB Eastern Caribbean Central Bank ECCU Eastern Caribbean Currency Union EDs Enumeration Districts HBES Household Budget and Expenditure Survey IMF International Monetary Fund MFEP Ministry of Finance and Economic Planning PIPS Price Index Processing Software PSU Primary Sampling Unit SO Statistical Office UN United Nations Page - 3 Section I.
Introduction Consumer Price Index 2010 – St. Vincent and the Grenadines REVISING ST. VINCENT AND THE GRENADINES CONSUMER PRICE INDEX JANAUARY 2010 The Consumer Price Index, commonly referred to as the CPI is one of the most important statistic produced by the Statistical Office, Central Planning Division, Ministry of Finance and Economic Planning (MFEP).

It is designed to provide information on trends in consumer prices and real cost-of-living of the population.
It is an important economic indicator and is used to adjust prices in order to measure real economic growth.

I.

INTRODUCTION The Consumer Price Index (CPI) is a measure of the change in average prices of a fixed basket of goods and services purchased by consumers in a specified reference period.

The CPI measures the rate of inflation or alternatively changes in the cost of living for households.
Generally, the CPI “basket” includes those goods and services frequently purchased by consumers and represents an important part of their expenditure.

The CPI definition emphasizes three important points: 1.

Between any two periods, some prices may increase, some decrease and others may be unchanged but the index will change based on the average movement of all prices.

2.

The index measures the purchasing power over time as it relates to a fixed basket of goods and services.

3.
3.

The index is essentially a consumer price index and therefore measures changes in the price of goods and services purchased by households.

It does not include capital goods or the goods and services typically purchased by enterprises and or government for business purpose.

Page - 4 Section II.

Why a New Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines II.

WHY A NEW CONSUMER PRICE INDEX?


The Statistical Office took a decision to update the CPI in collaboration with the Eastern Caribbean Central Bank (ECCB).

The Caribbean Regional Technical Assistance Centre (CARTAC) provided technical support to the Statistical Office through a sub-regional project.
The main aim of this exercise was to introduce updated methods and procedures used for compiling the CPI that are in accordance with international standards and also allow for comparison among the Eastern Caribbean Currency Union (ECCU) member states.

In an effort to update the old CPI, a Household Budget and Expenditure Survey (HBES) was deemed a necessary requirement.
As part of the Country Poverty Assessment (CPA) project funded by the European Development Fund, the HBES, which consisted of a detailed questionnaire on expenditure on goods and services and a diary survey of household’s daily expenditure, was conducted over the period November 2007- October 2008.

The HBES was based on an inquiry of the population and its expenditure on various goods and services to derive an updated CPI basket that reflected more recent consumer spending patterns.
The findings from this latest survey allowed for the addition of new goods and services that have become significant to households, and the removal of those that are no longer relevant.

The old CPI had its base in a HBES conducted in 1996, which represented a pattern of consumer spending that existed more than ten years ago.
Since then, consumer spending patterns have changed, and some of the items in the basket of goods and services have become irrelevant and outdated while new items have emerged as important.

It is therefore necessary to update the basket of goods and services periodically to ensure that the index continues to be relevant.

Page - 5 Section III.

Main Findings of the HBES Consumer Price Index 2010 – St. Vincent and the Grenadines III.
MAIN FINDINGS OF THE HBES From the HBES it was revealed that consumption patterns in St Vincent and the Grenadines have changed significantly.

As depicted in Table 3.0, the share of expenditure allocated to Housing, Fuel and Light, experienced the largest increase moving from 12.77 percent in 2001 to 30.06 percent in 2010, reflecting the addition of owner’s rent to the basket.
In contrast, the share of expenditure allocated to Food has fallen significantly from 53.61 percent in 2001 to 21.91 percent in 2010.

The Clothing and Footwear group also experienced a decline from 8.87 percent in 2001 to 3.22 percent in 2010.

Similarly, the expenditure share for Communication rose from 2.45 percent in 2001 to 9.41 percent in 2010, reflecting the importance of cellular phones and mobile communication.

Page - 6 Section IV.


Improvements to the New Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines IV.

IMPROVEMENTS TO THE NEW CONSUMER INDEX Through assistance from CARTAC, a consultant assisted in developing consumption expenditure estimates from the HBES and in deriving the new CPI market basket.

Training on the new CPI Manual (2004), and technical guidance on the use of the Price Index Processor System (PIPS) were also provided by CARTAC.
PIPS is the new CPI software developed by the IMF’s Statistics and Technology and General Services Department.

The introduction of the revised Consumer Price Index has enhanced the key features of the Index: Box 1: Key Features of the Revised Consumer Price Index Improved and expanded samples of outlets reflecting those normally visited by households.

This improves the coverage of the index as outlets not previously covered in the CPI have also been included.
The CPI is now more representative of St Vincent and the Grenadines.

Having new item structures that include both updated spending patterns and new products (e.g., adding college tuition, cell phones, and computers.

This improves the CPI by reflecting current patterns in consumer purchases.

Using the Classification of Individual Consumption by Purpose (COICOP), the international standard recommended in the CPI Manual (2004).
This replaces regional classification structures that were somewhat different with 11 divisions rather than the 12 as provided in COICOP.

Introduction of owner’s equivalent rent to make the CPI conceptually consistent with the System of National Accounts and to include owner-occupied housing in the index for the first time.

Page - 7 Section IV.
Improvements to the New Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines Box 1Cont’d: Key Features of the Revised Consumer Price Index Using the Price Index Processor System (PIPS) introduces major improvements to the methods and procedures currently used in the CPI, namely: Compilation of indices that uses geometric averaging rather than arithmetic averaging to reduce the bias that results from arithmetic average of prices and arithmetic average of price relatives; Imputation of missing prices that uses the price change of related products vs. carrying forward the last reported price, which has an inherent bias; Quality adjustments of prices to reflect pure price changes using techniques documented in the CPI Manual (2004); and Introducing new goods into the product and item structure using the techniques documented in the CPI Manual (2004).
Creating greater comparability across the region in terms of classifications, structure, methods, and procedures used in the CPI.

Page - 8 Section IV.

Improvements to the New Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines PURPOSE AND USES OF THE CPI The CPI is widely used as a general measure of inflation for three reasons.

It is easily available on a monthly basis; it is usually not revised and is published frequently.
The CPI is monitored by the general public and, therefore, is used for a wide variety of purposes such as the following: The CPI is often used by employers and other agencies for the adjustment of wages and salaries and by labour unions in collective bargaining and wage negotiations.

The CPI is used as a proxy for the general inflation rate, even though it only measures consumer inflation.
The price data collected for the CPI can be used to compile other indices, such as the price indices used to deflate household consumption expenditures in national accounts estimates, or for measuring differences in the purchasing power of money.

The CPI is used by some governments or central banks to set inflation targets for purposes of monetary policy.

The CPI is used to index other payments, such as rent, interest payment and price of bonds.
Private researchers, students and the public, use the CPI for social and economic studies of the economy, school projects and general information.

Additionally, the CPI has acquired a unique status as one of the key economic statistics in most countries.

There are several factors that help to explain this: All households have their own personal inflation experience and often compare it to the CPI.
The general public is very conscious of changes in the price of consumer goods and services, and the direct impact those changes have on their living standards.

Interest in the CPI is not confined only to policy makers.

Changes in the CPI tend to receive a lot of attention.

In fact, the publication can make headline news’ at times, as the CPI is a high-profile statistic.

Page - 9 Section IV.


Improvements to the New Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines The CPI is published frequently, usually each month, so that the rate of consumer inflation can be closely monitored.

It is also a timely statistic that is released very soon after the end of the period to which it refers.

The CPI is a statistic with a long history, and people have been familiar with it over time.
The CPI a relatively reliable price index compared with the price indices for some other flows.

Although price changes for certain kinds of consumer goods are difficult to measure because of quality changes, price changes for other kinds of goods and services, such as capital goods and government services, especially public services, tend to be even more difficult to measure.

The CPI is published regularly.


This makes it attractive for many purposes, especially those with financial consequences such as indexation.

Given the importance of the CPI to a multitude of users, the Statistical Office is making every effort to improve the accuracy and relevance of the Index.
Page - 10 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines V. CONSUMER PRICE INDEX PROCESSES THE DEVELOPMENT OF THE CPI The CPI market basket was developed from detailed expenditure information provided by families and individuals on what they actually bought.

The data used to develop the new CPI was collected from the Household Budget Expenditure Survey which was conducted during the period November 2007 to October 2008.
A sample of approximately 1,100 households which represented 4.4 percent of all households in the sampling from the 2001 Housing and Population census was selected for enumeration.

The survey consisted of a two-stage stratified systematic random sampling selection process.

At the first stage, Enumeration Districts (EDs) were selected based on a sampling frame constructed from Census Divisions (CDs).
The size of each ED as described as Primary Sampling Units (PSUs), included in the frame was measured in units of clusters of households to be interviewed in each enumeration district.

In the second stage, one cluster of households was randomly selected from the selected PSU with a probability proportional to size.

The end result was that each household had the same probability of being selected in the sample.
During the HBES period, a sample of families from around the country provided information about their spending habits for major consumer goods and services in an interview survey.

To collect information on frequently purchased items, such as food and personal care products, families also kept diaries, in which they listed purchases made during a 2-week period.
The Statistical Office has classified all expenditure items into more than 200 categories, according to the United Nation’s Classification of Individual Consumption by Purpose (COICOP), the international standard.

The categories are arranged into 12 Divisions as shown in Table 1.0.
Page - 11 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines Table 1.0 COICOP DIVISION WITH EXAMPLES OF ITEMS IN EACH CATEGORY COICOP DIVISION CATEGORY EXAMPLES 01 FOOD AND NON-ALCOHOLIC BEVERAGES Breakfast cereal, milk, coffee, chicken 02 ALCOHOLIC BEVERAGES AND TOBACCO Wine, beer, cigarettes 03 CLOTHING AND FOOTWEAR Men's shirts and pants, women's dresses and blouses, shoes 04 HOUSING, WATER, ELECTRICITY, GAS, AND OTHER Rent of primary residence, owners' equivalent rent, FUELS Electricity 05 FURNISHINGS AND HOUSEHOLD SUPPLIES Bedroom and living room furniture, detergents, 06 HEALTH cleaning supplies Prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services 07 TRANSPORT New vehicles, airline fares, gasoline, motor vehicle insurance 08 COMMUNICATION Postage, telephone services, cellular phones and service 09 RECREATION AND CULTURE Televisions, computers, software and accessories toys, pets and pet products, sports equipment, admissions 10 EDUCATION Primary, secondary, and college tuition and fees 11 RESTAURANTS AND HOTELS Full service meals at restaurants and cafes, snacks, Lodging 12 MISCELLANEOUS GOODS AND SERVICES Haircuts and other personal services, cosmetics, watches and jewelry, legal and funeral expenses Page - 12 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines Also included within these groupings are various government-charged user fees, such as water charges, auto registration fees, and vehicle inspection.
In addition, the CPI includes taxes (such as Value Added Tax, VAT) that are directly associated with the prices of specific goods and services.

However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services.

The CPI does not include investment items, such as stocks, bonds, real estate, and life insurance.

(These items relate to savings and investments and not to consumption expenses.)
CPI WEIGHTS The weights reflect the spending patterns of households during a previous period.

Much depends on how appropriate and timely the weights are.

The more current the weights, the more reflective they are of current consumer spending patterns.

It is therefore, important to update the weights used in the CPI.

The weights obtained from the sample are extrapolated to represent the entire population by the application of an expansion factor.
Establishing the weights for the items and subsequently the subgroups and major groups, all expenditures were expressed on an annual basis.

A base of 1000 was used to allocate the weights.
The following table shows the major grouping, annual expenditure and weight allocation in terms of percentages: Page - 13 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines Table 2.0 SUMMARY OF DIVISIONS BY ANNUAL EXPENDITURE AND WEIGHT COICOP DIVISIONS ANNUAL EXPENDITURE (EC$M) WEIGHT % FOOD AND NON-ALCOHOLIC BEVERAGES 238.30 21.91 ALCOHOLIC BEVERAGES AND TOBACCO CLOTHING AND FOOTWEAR 42.05 38.64 HOUSING, WATER, ELECTRICITY, GAS, AND OTHER FUELS 327.09 3.87 3.22 3.01 6.59 1.79 68.79 19.45 128.86 11.84 102.40 41.48 14.37 20.31 46.25 9.41 3.81 1.32 1.87 4.31 FURNISHINGS AND HOUSEHOLD SUPPLIES HEALTH TRANSPORT COMMUNICATION RECREATION AND CULTURE EDUCATION RESTAURANTS AND HOTELS MISCELLANEOUS GOODS AND SERVICES TOTAL 1,087.98 100.00 Page - 14 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines Chart 1.0 Structure of the new basket January 2010=100 Chart 1.1 Structure of the old basket January 2001=100 Page - 15 Food and Bevarages21.91%Alcoholic Beverages and Tobacco3.87%Clothing and Footwear3.22%Housing, Water,Electricity, Gas and other Fuels30.06%Furniture, Furnishings and Domestic Appliances6.59%Medical Care1.79%Transportation11.84%Communication9.41%Recreation and Culture3.81%Education1.32%Restaurant and Hotels1.87%Miscellaneous Goods & Services4.31%Food and Beverages53.61%Alcoholic Beverages and Tobacco0.95%Clothing and Footwear8.87%Housing, Water,Electricity, Gas and other Fuels12.77%Furniture, Furnishings and Domestic Appliances6.15%Medical Care1.01%Transportation4.40%Communication2.45%Recreation and Culture4.22%Education0.80%Restaurant and Hotels1.37%Miscellaneous Goods & Services3.40% Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines Table 3.0 Item Code Item COMPARISON OF CURRENT AND REVISED WEIGHTS ON THE COICOP STRUCTURE (EXPENDITURE SHARES) Current Revised Weights Weights Change All Items—COICOP 01 FOOD AND NON-ALCOHOLIC BEVERAGES 01.1.1 Bread and Cereals
 01.1.2 Meat 01.1.3 Fish 01.1.4 Dairy Products, Cheese and Eggs 01.1.5 Oils and Fats 01.1.6 Fruits 01.1.7 Vegetables 01.1.8 Sugar and Confectioneries 01.1.9 Other Foods 01.2.2 Coffee, Tea and Cocoa 01.2.1 Soft Drinks, Fruit & vegetable juice 02 02.1 02.2 03 ALCOHOLIC BEVERAGES AND TOBACCO Alcoholic Beverages Tobacco CLOTHING AND FOOTWEAR 03.1.2 Clothing 03.1.1 Textile Materials 03.1.4 Tailoring and Dressmaking 03.2 Footwear 100.00 53.61 13.87 7.06 4.66 4.85 4.18 2.71 9.67 4.72 0.48 1.19 0.22 0.95 0.72 0.23 8.87 5.44 1.66 0.37 1.45 100.00 21.91 -31.70 4.41 4.32 1.59 2.60 0.88 0.68 3.03 1.29 1.04 0.35 1.72 3.87 3.68 0.19 3.22 2.22 0.18 - 0.83 -9.46 -2.74 -3.07 -2.25 -3.30 -2.03 -6.64 -3.43 0.56 -0.84 1.50 2.92 2.96 -0.04 -5.65 -3.22 -1.48 - -0.62 04 HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 12.77 30.06 17.29 04.1.1 House Rent 04.9.1 House Tax 04.9.2 House Insurance 04.4.1 Water Consumption 5.57 2.02 0.73 0.98 19.26 13.69 - - - - 1.31 0.33 Page - 16 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines Item Code Item 04.3 04.5 House Repairs and decoration FUEL AND LIGHT FURNITURE, FURNISHINGS AND DOMESTIC 05 APPLIANCES 05.1.1a Furniture and furnishings 05.4 05.3 Glassware, Tableware & Household Utensils Household Appliances 05.6.1a Soaps and Detergents 05.6.1b Other Household Supplies 05.6.2 Domestic Servants MEDICAL CARE Current Revised Weights Weights Change 0.49 2.98 6.15 2.74 0.72 1.38 0.93 0.25 0.13 1.01 2.54 6.95 6.59 1.85 .20 1.19 1.78 0.12 1.45 1.79 2.05 3.97 0.44 -0.89 -0.52 -0.19 0.85 -0.13 1.32 0.78 06 07 08 09 10 TRANSPORTATION 4.40 11.84 7.44 COMMUNICATION 2.45 9.41 6.96 RECREATION AND CULTURE—COICOP 4.22 3.81 -0.41 EDUCATION—COICOP 0.80 1.32 0.52 11 11.1 RESTAURANTS AND HOTELS Meals at restaurants, cafes & the like 1.37 1.37 1.87 1.83 0.50 0.46 12 MISCELLANEOUS GOODS & SERVICES 3.40 4.31 0.91 Page - 17 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines
 Table 4.0 COMPARISON OF WEIGHT WITH OTHER ECCU COUNTRIES BY COICOP DIVISIONS 2010=100 CODE COICOP DIVISION T N E C N I V .
.

i S A I C U L .
t S S I V E N 01 02 03 04 05 06 07 08 09 10 11 12 FOOD AND NON - ALCOHOLIC BEVERAGES ALCOHOLIC BEVERAGES AND TOBACCO CLOTHING AND FOOTWEAR HOUSING, WATER, ELECTRICITY, GAS, AND OTHER FUELS HOUSEHOLD FURNITURE & FURNISHINGS HEALTH TRANSPORT 21.91 12.81 17.54 18.33 20.35 NA 13.27 16.04 25.00 3.87 2.34 2.01 0.77 1.83 NA 1.36 2.71 6.50 3.22 3.25 4.05 5.14 3.66 NA 4.90 4.20 1.70 30.06 25.56 28.15 30.69 29.05 NA 27.93 27.53 17.40 6.59 4.04 6.71 4.98 4.50 NA 7.05 6.09 3.30 1.79 2.34 1.37 3.36 1.94 NA 2.54 2.38 4.00 11.84 15.94 15.09 20.16 18.72 NA 21.71 16.13 16.40 COMMUNICATION 9.41 13.43 8.69 5.11 10.03 NA 6.90 8.46 12.50 RECREATION AND CULTURE 3.81 3.79 3.22 2.60 2.71 NA 2.89 2.91 1.40 EDUCATION (EXPENSES) 1.32 5.91 1.44 1.33 0.83 NA 2.43 2.41 3.70 RESTAURANTS AND HOTELS 1.87 4.04 4.14 2.70 1.81 NA 3.16 5.60 1.10 MISCELLANEOUS GOODS AND SERVICES TOTAL 4.31 6.54 7.58 4.83 4.59 NA 5.86 5.53 6.90 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Page - 18 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines PRICE COLLECTION Price collection begins on the first Friday in each month at which time enumerators make visits to gather price information from selected supermarkets, department stores, service stations, etc.
Prices are also collected in local markets during the month.

The HBES provided an updated list of goods and services that are in popular demand and are preferred by consumers, as well as the most popular establishments from which consumers made their purchases.

The criteria used for the selection of outlets were (1) the most frequently visited outlets as revealed by the survey and (2) the availability of goods and services at the outlet.

Prices are recorded on several selected goods and services.
The details on these goods and services are clearly defined, to guide the price enumerator in the selection of the correct items.

These prices and other relevant information are recorded on price sheets.

In cases where the selected item is available, the enumerator records its price.

If the item is not available for three consecutive months or if there have been changes in the quality of the item since the last collection, the enumerator selects a new item and records the changes that affect quality.
By collecting price data on a clearly defined market basket of products that consumers purchase for their day-to-day living, the Statistical Office ensures that the CPI will provide an accurate measure of price changes.

The new CPI basket comprises of 187 products and 1,338 varieties that are unique to the selected outlets.

Prices are collected from 243 outlets throughout St Vincent and the Grenadines.

This contrasts with the 275 products, in 83 outlets that previously concentrated in Kingstown.
For the entire month, more than three thousand prices are recorded from areas throughout St Vincent and the Grenadines.

Once the enumerators have collected the prices in a given month, they are reviewed and entered in the CPI database.
The Price Index Processing Software (PIPS) is the CPI database that was developed by the International Monetary Fund (IMF) to assist countries in compiling Page - 19 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines the CPI.

One advantage of using PIPS is that it provides statistical routines that can be employed to identify data that are potentially outside the bounds of statistical expectations.
The unusual prices are checked for accuracy and consistency.

Establishments may be contacted or revisited to provide explanations for the unusual changes.

Any necessary corrections or adjustments are then made.

Table 5.0 NEW CONSUMER PRICE INDEX CLASSIFICATION, WEIGHT, NUMBER OF ITEMS AND NUMBER OF OUTLETS 2010=100 Page - 20 COICOP DIVISONWEIGHT %NO.

OF PRODUCTS FOR PRICE COLLECTIONNO.
OF OUTLETS FOR PRICE COLLECTIONFREQUENCY OF PRICE COLLECTION01 FOOD AND NON-ALCOHOLIC BEVERAGES21.977212Monthly02 ALCOHOLIC BEVERAGES AND TOBACCO3.8779Monthly03 CLOTHING AND FOOTWEAR3.22183Monthly04 HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUEL30.068126Monthly & Quarterly05 FURNISHINGS AND HOUSEHOLD SUPPLIES6.591817Monthly & Quarterly06 HEALTH1.7953Monthly & Quarterly07 TRANSPORT11.842214Monthly & Quarterly08 COMMUNICATION9.4153Monthly & Quarterly09 RECREATION AND CULTURE3.811119Monthly & Quarterly10 EDUCATION1.32210Quarterly11 RESTAURANTS AND HOTELS1.8745Monthly & Quarterly12 MISCELLANEOUS GOODS AND SERVICES4.311522Monthly & Quarterly TOTAL100187243 Section V. Consumer Price Index Processes Consumer Price Index 2010 – St. Vincent and the Grenadines Table 6.0 CLASSIFICATION, WEIGHT, NUMBER OF ITEMS AND NUMBER OF OUTLETS OLD CONSUMER PRICE INDEX 2001=100 Page - 21 COICOP DIVISONWEIGHT %NO.
OF PRODUCTS FOR PRICE COLLECTIONNO.
OF OUTLETS FOR PRICE COLLECTIONFREQUENCY OF PRICE COLLECTION01 FOOD AND NON-ALCOHOLIC BEVERAGES53.611148Monthly02 ALCOHOLIC BEVERAGES AND TOBACCO0.95113Monthly03 CLOTHING AND FOOTWEAR8.77255Monthly04 HOUSING9.791713Monthly 05 FUEL AND LIGHT2.9842Monthly06 HOUSEHOLD FURNITURE AND SUPPLIES6.15439Monthly & Quarterly07 MEDICAL CARE AND EXPENSES1.0177Monthly & Quarterly08 TRANSPORT AND COMMUNICATION6.85138Monthly & Quarterly09 EDUCATION3.43128Quarterly10 PERSONAL SERVICES3.35157Monthly11 MISCELLANEOUS GOODS AND SERVICES3.011413Monthly & Quarterly TOTAL100.0027583 Section VI.
Sources and Methods Consumer Price Index 2010 – St. Vincent and the Grenadines VI.

SOURCES AND METHODS COMPUTATION OF THE CPI The CPI is generally compiled at two levels (i) the elementary level using an equally-weighted geometric mean (Jevons) index and (ii) the weighted higher level using a geometric aggregate (Cobb-Douglas) index.

After the prices are collected, price changes from the previous month are calculated for each price variety.
These price relatives are used to calculate each of the item level indexes using a geometric average formula (Jevons) as follows: Box 2: Geometric Average Formula (Jevons) Where: refers to the price in the current month (t) refers to the price in the previous month refers to the previous month’s item index Page - 22 1/111ItemItemNtNttijjtiipptip1tip1Itemtj Section VI.
Sources and Methods Consumer Price Index 2010 – St. Vincent and the Grenadines Once the item indices are calculated the higher level indices for divisions are compiled.

The weights used to combine the item indices to derive the total CPI are taken directly from the recent HBES conducted in 2007/2008.

The base price reference period when the index is 100 is January 2010 (Jan 2010 = 100).
The Cobb-Douglas formula is used for the higher level indices: Box 3: Geometric Average Formula (Cobb-Douglas) Where: refers to the item indexes in the current month (t) M is the number of items in the basket (187) refers to the weight of item j in the 2007/08 HBES.

Next, the PIPS calculates weighted indices and percentage changes that show price changes for each category of item.
The statistical officers review and analyze the data and prepare a written release that is made available to government agencies, the media, and the public.

The entire process of reviewing, analyzing, and publishing the data is finished in about 4 weeks after the last data are collected.

Page - 23 200820101ItemMjtJantjjw =CPIItemti2008jw Section VI.
Sources and Methods Consumer Price Index 2010 – St. Vincent and the Grenadines MATCHED PRICE OBSERVATIONS AND IMPUTING MISSING PRICES A price relative is calculated for each variety comprising the CPI basket.

The calculation of price relatives would be simple if a complete set of price quotations were available for the current and previous month.

In reality, this does not always happen.

Quite often, some of the respondents are unable to provide a price for a particular variety because it is out of stock.
Whenever a particular price observation is missing from either the previous month or the current month, the corresponding price observations are eliminated from the other period.

This is equivalent to imputing the price of variety (1) in period (t) by the short-term price change of other varieties in the product group.

This ensures that the price relatives are calculated on the basis of “matched observations”, i.e., a consistent sample of price quotations in each period.
IMPUTING MISSING INDEXES A missing price index is estimated using its parent index as the proxy, i.e., if a specific product’s index in an outlet is missing due to the missing prices, the index of the product or item it belongs to will be taken to be representative.

For higher levels, the next available index data in the same group or item for the missing index will be used.
Holding missing prices for a variety constant by carrying the last observation forward (i.e., making the short-term price relative for that variety equal to 1.0) during a period of high inflation, would cause short-term distortions in the index.

This is because it would understate inflation while the variety was unavailable and then show a large increase in the index when the variety becomes available.
Furthermore, the price for the same variety in another outlet is not used to represent the missing price in this outlet.

Thus, if the Coca-Cola price is missing in one particular outlet, another outlet’s Coca-Cola price will not be used as a proxy.

Instead the soft drink index in the same outlet will be taken to represent that of Coca-Cola.

Since parent-group price changes are always calculated as geometric mean changes, imputations are based on geometric means.
If no price is collected for any variety covered by a product (the prices for whole product are missing), its price relatives will be imputed using average price relatives from the item group of the missing price.

Page - 24 Section VI.

Sources and Methods Consumer Price Index 2010 – St. Vincent and the Grenadines DETECTION OF OUTLIERS An outlier is an observation that is unusually large or small relative to the other values in a price relative data set.
Outliers are the observations that appear to be inconsistent with the remainder of the collected data.

There are several possible sources for outliers: 1.

2.

3.

The price quotation of a transaction or variety is observed, recorded, or entered into the computer incorrectly.

The price quotation comes from a different population, or the quality of that transaction/variety has changed.

The price quotation entered is correct, but represents a rare event or novel phenomenon.
Outliers occur when the relative frequency distribution of the data set is extremely skewed.

Such distributions have a tendency to include extremely large or small observations.

Two procedures can be applied to identify the possible errors, when outliers are detected.

The first one is a non-statistical procedure, which is to find whether a specific price observation falls outside some pre-specified acceptance interval.
Generally, a 20 percent threshold is used to identify large and unusual changes when prices are first entered.

The second procedure is a statistical measure in which three methods are implemented.

In both cases outlier detection will not result in automatic deletion.

Often price changes are undertaken after some time and the “pent-up” price changes are unusually large.

To delete them would bias the index downwards.


The outlier detection is to alert the compiler about a possible error that needs further investigation.

Three approaches for identifying outliers in the current period’s prices are outlined below: Using Z-scores Box Plot Method Page - 25 Section VI.
Sources and Methods Consumer Price Index 2010 – St. Vincent and the Grenadines Log-normal Method METHOD OF USING Z-SCORES In a Z-score test, the mean and standard deviation of the entire data set are used to obtain a Z- score for each data point, according to following formula: Where is the arithmetic mean and the standard deviation, i.e.
If the observations have a bell shaped distribution (normal distribution), the interval from to will contain approximately 68% of the measurements; the interval from will contain approximately 95% of the measurements, and the interval from to to will contain approximately all of the measurements.

The Z-score method may be biased if both the mean and standard deviation are affected by the outliers.
BOX PLOTS METHODS Another procedure for detecting outliers is to construct box plots of the price relatives data.

They make no distributional assumptions and, since they rely on the median and quartiles as parameters, the method of detection is not influenced by the outliers themselves.

Below are the steps implemented in constructing the box plots for the software.

The median M, lower and upper quartiles, QL and QU, and the inter-quartile range, IQR= QU - QL are calculated for the data set.
Page - 26 sxxZii)(xs1)(12nxxsniisxsxsx2sx2sx3sx3 Section VI.

Sources and Methods Consumer Price Index 2010 – St. Vincent and the Grenadines Two sets of limits on the box plot are constructed: inner fences are located a distance below QL and above QU; outer fences are located a distance of below QL and above QU.

Observations that fall between the inner and outer fences are called “suspect” outliers.
LOG-NORMAL METHOD Another method used to identify the possible errors and outliers is to use 2 standard deviations from the log-normal distribution, excluding price relatives of 100 (no change of prices from previous to current period).

It takes the natural logarithms of price relatives data, which is assumed log-normally distributed.

The standard deviation and mean of the log of all price relatives in the sample are calculated.
Those price relatives that fall outside of 2 standard deviations (with 95% confidence level) are considered as possible outliers.

Page - 27 Section VII.

Application of the Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines VII.
APPLICATION OF THE CONSUMER PRICE INDEX The Consumer Price Index is used by many employers and agencies for the adjustment of wages and salaries, by labour unions in collective bargaining, by economist as a gauge for assessing the current performance of the economy and by government in formulating and evaluating many economic policies.

In addition, extensive use is made of the CPI series by researchers, students and institutions.

One of the major uses of the CPI is to measure inflation.
Inflation is expressed as a percentage and is calculated as the change in the current index over the same period index of the last year.

For example, the rate of inflation for the period February 2006 compared to February 2005 was 2.60 percent.

This was computed by taking the index of “All Items” for February 2006 (82.83) and dividing it by the All Items index for February 2005 (80.73) and multiplying by 100.
To determine the effect of inflation on a nominal value, it is necessary to deflate the value by the index prevailing at the time.

The following table is an example of the application of the CPI showing the effects of inflation on EC$ 100.00.
Table 7.0 YEARS 2005 2006 2007 2008 2009 PURCHASING POWER OF EC$ 100.00 2005 -2009 REAL VALUE EC$ 100.00 95.17 91.62 84.82 85.07 NOMINAL VALUE (EC$) CONSUMER PRICE INDEX 2005=100 100.00 100.00 100.00 100.00 100.00 100.00 105.08 109.15 117.90 117.55 Page - 28 Section VII.
Application of the Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines As shown in table 7.0, in 2005 a one hundred dollar, which had the purchasing power of buying a fixed amount of goods and service, will no longer have that purchasing power in 2009, the real value of that EC$ 100.00 is EC$ 85.07, which means that the consumer will have to adjust the goods and services consumed, or find an additional amount of money.
COMPUTATION OF AVERAGE PRICES The average price method used in the new CPI price computation is based on the geometric average and not the arithmetic average which was previously used in computing the average price in the old CPI.

The geometric average is preferred since it is not as affected by extreme values (that is items with large price variance).
Table 8.0 Computation of average prices using arithmetic and geometric mean ITEM Milk (powdered) (Lb) English Potatoes (Lb) Corned beef (12 oz tin) Chicken (leg quarters) (Lb) OUTLET PRICE A B C 5.99 5.65 7.00 2.15 2.00 2.65 5.09 5.00 5.65 2.08 2.45 3.75 Arithmetic Average Geometric Average 6.21 2.27 5.25 2.76 6.19 2.25 5.24 2.67 Page - 29 Section VII.
Application of the Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines Table 9.0 CHANGES IN THE CONSUMER PRICE INDEX OVER THE PAST THREE YEARS CODES GROUPS WEIGHT FEB 2010 FEB 2009 FEB 2008 JAN 2010 PERCENTAGES CHANGE FEB 2010 FEB 2009 FEB 2010 FEB 2009 FEB 2008 JAN 2010 ALL ITEMS 100.00 100.05 100.84 95.75 100.00 -0.79 5.09 0.05 01 02 FOOD AND NON-ALCOHOLIC BEVERAGES ALCOHOLIC BEVERAGES AND TOBACCO 21.91 99.76 102.77 93.17 100.00 -2.88 9.60 -0.11 3.87 99.92 97.16 92.86 100.00 2.23 4.30 -0.61 03 CLOTHING AND FOOTWEAR 3.22 98.43 99.93 98.50 100.00 -1.50 1.43 -1.57 04 05 06 07 08 09 10 11 12 HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS HOUSEHOLD FURNITURE AND FURNISHINGS 30.06 100.31 97.91 102.89 100.00 2.40 -4.98 0.31 6.59 100.08 100.11 96.20 100.00 -0.02 3.91 0.09 HEALTH 1.79 100.00 91.95 85.41 100.00 8.05 6.54 0.00 TRANSPORT 11.84 100.74 91.15 101.78 100.00 9.59 -10.63 0.74 COMMUNICATION 9.41 100.00 100.0 100.00 100.00 0.00 0.00 0.00 RECREATION AND CULTURE 3.81 99.22 99.99 100.88 100.00 -0.76 -0.89 -0.77 EDUCATION (EXPENSES) 1.32 100.00 96.99 93.98 100.00 3.01 3.01 0.00 RESTAURANT AND HOTELS 1.87 100.00 100.00 100.00 100.00 0.00 0.00 0.00 MISCELLANEOUS GOODS AND SERVICES 4.31 99.85 99.26 96.40 100.00 0.50 2.86 -0.24 Page - 30 Section VII.
Application of the Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines Table 10.0 AVERAGE RETAIL PRICE OF SELECTED ITEMS 2002 – 2009 Page - 31 ItemUnit 20022003200420052006200720082009 Sandwich Loaf (white)each2.252.262.252.332.572.663.103.37Cream of Wheat397g box7.166.667.116.616.236.707.157.96Beef -fresh10.0010.0010.0011.3312.0013.3414.1314.18Pork-Freshlb5.005.005.005.756.137.218.628.47Chicken -wingslb2.272.282.672.872.923.474.113.83Chicken - legslb3.042.683.313.683.733.653.723.87Chicken - backslb0.850.840.911.061.111.101.301.41Fish - fresh (Jacks)lb2.882.883.003.003.963.754.004.00Fish - fresh (Robin)lb3.002.713.083.884.004.505.334.50Codfishlb7.007.227.418.189.2910.1811.0610.60Sardines - canned106g tin1.841.891.931.972.202.482.662.69Corned Beef - canned12 oz tin3.333.153.423.594.204.234.164.92Cooking MargarineTub3.904.094.354.484.654.755.486.74Cheeselb6.485.767.088.889.3510.9413.6610.53EggsDoz4.965.405.995.506.036.968.097.64Milk -powdered (full cream)lb3.253.404.024.574.606.487.945.55Milk - evaporated 410g tin1.941.941.962.102.202.282.502.59Milk - condensed397g tin2.382.402.432.472.552.562.853.04Cooking Oil Litre5.865.916.036.306.226.707.368.89Tomato Ketchup750ml5.095.115.115.215.424.754.865.11Salt (fine - loose)lb0.450.450.450.500.580.600.550.61Grapefruit Juice19 oz Tin3.583.583.673.944.585.275.315.75Orange Juice19 oz Tin3.593.593.693.964.635.455.835.96Brown sugarlb0.820.820.820.820.820.860.910.99Flour -looselb0.750.760.760.760.740.771.091.22Ricelb0.960.960.970.960.971.001.361.75Yeast1/4 lb Pkg3.073.053.143.153.123.393.253.21AVERAGE RETAIL PRICES Section VII.
Application of the Consumer Price Index Consumer Price Index 2010 – St. Vincent and the Grenadines Table 10.0 Cont’d AVERAGE RETAIL PRICE OF SELECTED ITEMS 2002 – 2009 Page - 32 ItemUnit 20022003200420052006200720082009Bananas - ripeEach0.380.390.520.500.470.500.460.26Carrotslb2.953.283.443.954.013.934.194.08Eddoeslb1.261.491.431.521.501.782.061.77Dasheenslb1.491.381.501.441.621.571.941.83Sweet Potatoeslb1.241.601.381.711.521.611.791.79OrangesEach0.530.540.440.570.580.570.780.67Onionslb1.421.451.631.671.832.442.131.97Tomatoeslb4.013.994.775.234.854.524.624.52Rum - local (white)750 ml Bot15.3015.3015.3017.7617.9819.3921.6525.80Beer - local280 ml Bot2.502.502.502.602.603.303.513.59Malta310 ml bot3.003.003.003.103.104.014.624.75Men's long sleeve shirtEach48.8746.9546.7849.9549.9554.9554.9554.95Underwear (ladies)Each8.707.786.956.956.955.005.005.00Dress material -linenYard16.9516.9514.9513.9513.9514.0014.7015.28Galvanise SheetFoot3.453.733.734.204.774.905.356.47Oil PaintGal84.4183.9782.2183.1883.8587.1886.6987.42Lumber (dressed pine)Bd Ft2.912.932.972.912.833.123.283.27Cement 94 lb bag13.5013.5013.5813.9916.6819.0620.3521.46KeroseneGal6.006.006.009.0011.0012.0013.278.82LPG (cooking Gas)20lb Cyl30.0030.0030.0030.0033.7535.0035.0035.00Electricity120KWH75.7779.4383.0894.38101.31102.56123.7493.52Frying PanEach39.9539.9539.9539.9539.9545.9545.9545.95Light bulbEach 2.912.422.452.412.342.393.143.46Toilet SoapEach1.761.841.591.321.511.512.052.33Toilet PaperEach0.970.960.930.981.011.081.081.11ToothpasteTube5.515.505.726.516.777.357.367.45AVERAGE RETAIL PRICES Section VIII.
Conclusion Consumer Price Index 2010 – St. Vincent and the Grenadines VIII.

CONCLUSION The new basket of goods and services became necessary because of significant changes that took place in the buying habits and the spending pattern of consumers.

The obvious shifts in the distribution of the population as well as changes in the demographic composition also contributed to the need for the revision of the basket of goods and services.
The CPI numbers are published in the monthly CPI Bulletin that is prepared by the Statistical Office.

Detailed technical information about the CPI is also available on request.

The CPI basket poses two main challenges for the maintenance of the basket, namely: 1.

Collection of prices from the public vegetable market where the items are not sold by weight but rather by heaps.

2.

The maintenance of a homogenous basket of goods and services in cases where brands and specification changes frequently.
Page - 33