CSO publication, , 11am
The Consumer Price Index (CPI) is designed to measure, in index form, the change in the average level of prices paid for consumer goods and services by all private and institutional households in the country and by foreign tourists while on holiday within Ireland. It is the most widely used measure of consumer inflation. It is compiled and published every month by the Central Statistics Office (CSO). It is an accurate, objective and independent measure of price changes of consumer goods and services.
The index expresses the current cost of purchasing a fixed basket of consumer goods and services as a percentage of the cost of purchasing the same identical basket at the base period December 2023 equal to 100. It is compiled from prices collected over a period of more than one week, i.e. the Monday prior to the second Tuesday of the month up to and including the third Tuesday of the month.
The CPI is an average price index designed to cover all household types from urban to rural, from high to low-income and covering differences in age and marital status. It measures the price changes of goods and services typically consumed by all consumers. The expenditure of foreign tourists on holiday in Ireland is included since December 2001, while the expenditure of institutional households is included since December 2012.
The current monthly series was introduced in January 2024 to base December 2023=100.
The expenditure weights used in the index reflect the average expenditure by all households on various categories of goods and services. In effect, the weighting of each item in the basket is a way of expressing the importance of the amount of money spent on each.
The expenditure weights at sub-index level (4-digit COICOP) are updated annually using National Accounts “Household Final Monetary Consumption Expenditure” (HFMCE) data for year t-2, price updated to t-1 as the primary source. The weights below sub-index (i.e. item or basket weights) are recalculated based on Household Budget Survey (HBS) data when there is an updating of the CPI basket of goods and services.
The updating of the basket usually occurs every five years, however due to the COVID-19 pandemic, the most recent rebase and updating of the basket was postponed until December 2023 as the HBS was delayed. At the most recent rebasing, December 2023=100, many new items were added to the basket and a number of items were removed. Items added to the basket included air fryers, milk and meat substitutes, non-alcoholic beer and gin. Some items that were removed included nightclubs, digital cameras, landline telephones and Swiss rolls. At present, there are a total of 612 items in the basket.
Every household purchases a different combination of goods and services. While the CPI represents all households in Ireland, it is obvious, given the number of different goods and services available in the market place, that not every item purchased by every household can be included in the CPI basket. A selection of the most representative goods and services is made.
The absence of any one type of a particular item from the basket is not in itself flawed or incorrect. It is not possible to cover every variation of each item or every brand. A representative sample of certain items is priced on a monthly basis to reflect the overall change in all variations of such items. The item chosen for pricing purposes is deemed to be representative and the change in the price of the selected item is used as a proxy for the general price movement under each heading. For example in the case of fresh or chilled fish, three items (1) fillet of hake, (2) fillet of cod and (3) salmon, have been selected as the most popular items in terms of consumption and as representative of all the different varieties that could be classified under that heading.
Each month the CSO issues the Consumer Price Index release. This shows the monthly and annual changes in prices. These are the figures that are normally referred to by the media. While the overall index is important, the breakdown of the consumer basket into 12 main Classification of Individual Consumption by Purpose (COICOP) divisions allows for the determination, at a more detailed level, of the causes of such changes and also allows for the estimation of the contribution of each division and/or item to the overall change in prices in the month and year. The index is split into 12 main COICOP divisions (each of which has its own individual set of price indices, i.e. inflation) as follows:
Note: Alcoholic Beverages consumed in/on licensed premises are included in 11 Restaurants & Hotels
Each month, approximately 30 price collectors collect around 10,000 prices directly from shops and other retail outlets. Another 10,000 prices are collected online in the CSO and another 20,000 prices are provided as transaction data by retailers directly to the CSO. In addition to this, 3,000 prices are collected by the Consumer Prices Special Inquiries area using email and telephone inquiries along with additional internet price collection.
Price collectors are given a broad specification for the items they select initially and are required to choose an item that is popular and available. They then have to price the same item month on month. If the item is no longer available, a new comparable item is chosen and priced going forward. This new item is not compared to the item it was replacing. This same methodology is applied to the data collected online and also to the transaction data collected directly from retailers. In this way, the many different choices made by consumers relating to brand, size and point of purchase are reflected.
A situation where the rate of inflation remains low, but some prices rise at a much faster rate can cause confusion and disbelief. The CPI captures all price changes. The CSO has to take account of all consumer goods and services whose prices may change at varying rates, with some items falling in price, others increasing, and others remaining static. The price of a good or service may rise rapidly but this will only impact on the overall rate of inflation if its share of total overall consumer expenditure is significant. For example, a 2% increase in the price of petrol has a greater effect than a 20% increase in the price of mayonnaise on the overall index.
The purchase of a house is an investment in a capital asset, purchased over a long period of time that usually appreciates in value. It does not form part of consumption. House prices are excluded from the index. The CPI does, however, include the current costs of housing, such as mortgage interest costs. These costs reflect not only changes in interest rates, but also the size of the average mortgage. Measurement of the latter considers the trend in house prices and as a result, these price trends are considered, indirectly, in the index.
The Central Statistics Office is continuously improving our methods, improving data sources, extending the coverage of the data collected and analysing changing market conditions. A more detailed explanation of the compilation of the CPI is contained in the Consumer Price Index Introduction of Updated Series (Base: December 2023=100) which is available on the CSO website.