NOTES ON METHODOLOGY
Consumer price index
The consumer price index (CPI) measures changes in the prices of goods and services acquired, used or paid over time by the reference population (private households) for consumption purposes.
The CPI can be used for various purposes. It can be used as a measure of inflation, it can serve to guarantee the value of recurrent payments in escalator clauses for contractual relationships (for example, the CPI can serve for indexing wages and salaries in collective agreements, for indexing pensions etc.), as well as a comparison of the price movements within a particular country between different economy sectors, it can serve as a basis for deflating the national accounts data and other statistical series and can be used for analytical purposes.
The CPI in the Republic of Croatia is calculated on the basis of a representative basket consisting of about 890 different items. About 38 000 prices are collected each month in a fixed panel of outlets in nine geographical locations.
Population coverage. All private households in the country, regardless of type of settlements, position in income distribution or their ethnic and demographic characteristics, are covered.
Geographic coverage. The weight structure covers the whole territory of the Republic of Croatia. The pricing takes place in nine locations (cities and towns) throughout the country (Zagreb, Slavonski Brod, Osijek, Sisak, Rijeka, Pula, Split, Dubrovnik and Varaždin), sampled on the basis of the size of the population and representativeness at NUTS 2 level.
Product coverage. All goods and services bought by the reference population for the purpose of final consumption are included in the index. Imputed rents, expenditures on lotteries and gambling and life insurance are not included. The coverage of goods and services is reviewed regularly in order to ensure the representativeness of the basket with respect to consumer tastes and purchasing practices. Products have to be included in the calculation of the index once their expenditure share exceeds 1/1000 of the total expenditures of the reference population.
Most of the prices are collected locally, and central price collection is applied in cases of nationally homogeneous prices. For products for which prices are collected locally, the price collectors receive loose specifications and they are free to initially select a particular product for pricing in a particular outlet. In order to make sure that the same products are then re-priced each month, as well as to monitor which products are selected for pricing, the price collectors also record a pre-defined set of additional product characteristics. Such a method of price collection enables the monitoring of price change between two periods, but not the comparison of average prices between different geographic locations.
For the purpose of the CPI, most prices are recorded monthly, on working days (prices are not recorded during weekends and public holidays) on approximately the same day of the month (between 13th and 23rd day of the reference month). Prices of agricultural products sold in market places and prices of passenger air transport are recorded twice a month. Prices of fuel for passenger cars, prices of package holidays, prices of apartment rents and prices of accommodations in camps are recorded weekly. Prices of market rents are recorded quarterly, while prices of education fees and prices of school books are recorded once a year.
The weights used for calculating the CPI reflect the relative importance of the sampled goods or services in the total consumption of resident households within the domestic territory.
The most important data source for calculating the weights used in the consumer price indices is the Household Budget Survey, conducted on a regular basis by the Croatian Bureau of Statistics since 1998. The data collected by these surveys are supplemented by available administrative data. Since January 2020, the compilation of the CPIs has been based on the weights derived from data on household expenditures from the 2017 Household Budget Survey recalculated to December 2019 prices.
The classification of products used in the CPI is based on the European Classification of Individual Consumption according to Purpose (ECOICOP).
Calculation of indices
The calculation of the CPIs begins with the computation of the elementary aggregate indices.
The elementary aggregate indices are compiled as a ratio of the geometric mean of prices for each geographical location. It means that prices for product-offers within elementary aggregates in the current month are compared to the prices of the reference period (December of the previous year). From elementary indices at the level of geographical locations, elementary aggregate indices at national level are then calculated by using the formula for the weighted arithmetic mean.
Elementary aggregate indices at national level are aggregated to higher index levels using Laspeyres' type formula.
Treatment of seasonal products
In calculating the index for seasonal products, the Commission Regulation (EC) No. 330/2009 of 22 April 2009 (minimum standards for seasonal products) applies.
Elementary aggregates are products at the lowest aggregation level, that is, products in all outlets on one geographical location. The data required for the estimation of weights are typically not available within an elementary aggregate.
An annual index measures the price change between the current month and the same month of the previous year. This measure is responsive to recent changes in price levels but can be influenced by one-off effects in either month.
A twelve-month average index overcomes this volatility by comparing the average in the last 12 months to the average of the previous 12 months.