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Brian Graf

Introduction 11.1 Certain products have proven to be challenging for consumer price index (CPI) compilers with regard to developing weights and collecting prices. Chapter 11 focuses on selected special cases and provides detailed advice for some of the more challenging products and issues facing compilers. These include the treatment of seasonal products, internet purchases, housing, second-hand goods, own-account production, tariffs, telecommunications, transport services, health, education, social protection, and financial services. 11.2 Wherever

Mr. Marshall B Reinsdorf

Front Matter Page Statistics Department Contents I. Introduction II. Why COVID-19 Weights Could Tend to Imply more Inflation III. Empirical Evidence on the Changes in Spending Patterns IV. Estimating the Effect on the CPI of Adjusting the Weights for COVID-19 V. Results VI. How Should CPI Compilers Respond? A. Should the CPI Weights be Updated to Reflect Budget Shares during the Pandemic? B. Supplementary Index showing Changes in the Cost of Living during the Pandemic C. Possible Need for Special Procedures for Planned Updates of

Mr. Marshall B Reinsdorf

changes. Section V presents the results. Section VI makes recommendations for CPI compilers and users. A concluding section summarizes the main findings and recommendations. II. Why COVID-19 WeigCould Tend to Imply more Inflation 5. The CPI is constructed as a weighted average of micro-indexes in which the weights reflect the budget shares of a base period . These budget shares are estimated from a consumer expenditure survey, sometimes in combination with national accounts data. Most countries use a Lowe index formula for the CPI. This formula adjusts the

Mr. Marshall B Reinsdorf
COVID-19 changed consumers’ spending patterns, making the CPI weights suddenly obsolete. In most regions, adjusting the CPI weights to account for the changes in spending patterns increases the estimate of inflation over the early months of the pandemic. Under-weighting of rising food prices and over-weighting of falling transport prices are the main causes of the underestimation of inflation. Updated CPI weights should be developed as soon as is feasible, but flux in spending patterns during the pandemic complicates the development as quickly as 2021 of weights that represent post-pandemic spending patterns.
International Monetary Fund. Statistics Dept.

on portfolio investments of resident households; the lack of participation by important partner countries; the absence of plans to compile IIP statements; and concern that the release of confidential data to CPIS compilers might discourage investment. These issues must be successfully resolved prior to implementation of the 2001 CPIS. The participation of the major investing countries and OFCs is essential if the 2001 CPIS is to provide a reliable measure of world holdings of portfolio investment assets and an equally reliable measure, which will be based on

Brian Graf

prices throughout the country. However, comprehensive coverage is not always necessary, especially if regional CPIs are not published and the sampling program ensures that the index is representative of the whole country. In such situations, CPI compilers should collect evidence from time to time on the trends in prices in different regions over periods which cover differences in seasonal variations, to ensure that the sample remains representative. Any region which shows price trends significantly different from the others should be covered by the CPI if its inclusion