This document describes changes to the method of calculating the Irish Consumer Price Index (CPI) and Harmonised Index for Consumer Prices (HICP). This change is for International Package Holidays. It describes the methodology change and the reasons for this change.
| Details of Methodology Change | ||
|---|---|---|
| Items affected | International Package Holidays (COICOP 09.6.0.2)[1] | |
| Weight of items affected |
1.1% of Irish CPI 1.2% of Irish HICP |
|
| Date of change | January 2023 | |
| Description |
|
|
The CSO used a ‘Seasonal Baskets’ approach for International Package Holidays up to December 2022. In this method the prices of holidays in consecutive months are never compared with each other. Instead, the prices of (e.g.) April holidays are compared with the prices of the same April holidays from one year before. This results in an annual change in price being calculated each month. The monthly change in price is then derived by linking these annual changes. This approach is referred to as pricing ‘Seasonal Baskets’.
The prices of package holidays are highly seasonal, but the previous methodology produced an index without any seasonal pattern and with small changes from month to month. The new method will see the actual seasonal pattern of package holidays better reflected in the index.
International Package Holidays are the only item in the CPI basket that used this methodology of comparing prices with prices 1 year before. The new method makes the methodology of International Package Holidays consistent with other items in the basket by comparing prices of holidays with prices of the same holidays in the previous month.
It brings the International Package Holidays index into compliance with the HICP Regulation (EC) No 1749/96 Articles 5 and 6, because the same holidays will be priced in consecutive months. A quality adjustment technique will be used whenever a replacement holiday has to be chosen.
The same holidays will be priced each month and each month’s prices compared with the corresponding prices of the previous month. This makes the methodology of International Package Holidays consistent with the other items in the CPI basket.
Some types of holidays are only sold for some months of the year. Examples are skiing holidays and sun holidays to destinations in Southern Europe. These seasonal holidays will be assigned imputed prices for the months where they are not sold, allowing us to compare prices with previous month’s prices all year for these types of holidays also.
The prices of package holidays are highly seasonal, but the previous methodology produced an index without any seasonal pattern and with small changes from month to month. The effect of holidays being more expensive in the same months every year on the index was minimized by the seasonal baskets approach.
The new method will see the actual seasonal pattern of package holidays reflected in the index. The index will have higher month-on-month changes and will have more peaks and troughs.
Because we are changing from a relatively flat index to an index with peaks and troughs, the 2023 package holidays index will have large annual changes in some months. These changes should be a balance of large increases in some months and large decreases in other months. This will be a result of the change in method rather than a description of the market. This should not happen from 2024 onwards as the method in the current and previous years will then be the same.
The change in methodology described here will not lead to any revisions to the CPI or HICP.
Once the CPI indices are published, they are never revised.
The HICP can be revised in the case of a mistake or if there is new or improved information. Neither of these is the case with this change in methodology. See the EC Regulation number 1921/2001 for the HICP revisions policy.
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32001R1921&from=EN
16 February 2023
[1] Classification of Individual Consumption According to Purpose (COICOP)