Overview
Economies participating in the ICP collect prices for a selection of the goods and services that make up final consumption expenditure and gross capital formation. There are four main surveys:
· Household consumption
· Government consumption
· Machinery and equipment
· Construction and civil engineering.
The household consumption survey covers the largest expenditure share, accounting for around 55 percent of GDP on average. It includes a wide assortment of goods and services purchased by households for individual consumption. This survey also includes two additional surveys that are treated separately due to different data requirements; these are the private education and housing surveys.
The government consumption survey compiles administrative or survey data on the compensation of public employees in a variety of public health services, public education services and collective services. This selection of government occupations represents the various education and skill levels that are commonly found among employees working in these three government sectors.
The machinery and equipment survey is based on a list of industrial, transportation, and electronic items commonly used in a variety of industries for the production of goods and services. The items on this list are often paired as brand specific and not brand specific—that is, generic—items with the same characteristics. The construction and civil engineering survey is based on a list of common resources for construction work, including materials, equipment hire rates, and labor costs. In addition, respondents are required to provide information on resource mixes, that is, material, equipment hire rate, and labor cost shares.
For each of these surveys there is both a global core list (GCL) of items, prepared by the Global Office in consultation with regional, and national implementing agencies, and a list of region-specific items representative of the consumption patterns in each region. In each ICP cycle, items on either the global core list and regional lists are carefully reviewed and updated where necessary, for example technology-related items, while maintaining broad consistency with previous ICP cycles. Regional PPPs are first computed on the basis of both the global and regional lists. The global core list items, in turn, are used to link regional PPPs across regions.
All prices reported are national annual average prices, in local currency, for the reference year—that is, they should be the average of the prices collected at regular intervals throughout the year. When price surveys are conducted outside the reference year, prices are retropolated or extrapolated based on consumer price index (CPI) data or other price indices, such as national accounts deflators.
Household consumption
Household consumption survey
This main survey collects prices for a wide range of goods and services for household consumption, such as food, beverages, tohigher weight in the estimation of basic-heading PPPs for that economy.
Private education survey
This survey collects annual tuition prices for private education institutions at the primary, secondary, and tertiary levels as well as other education services, such as foreign language and private tutoring. The private education survey is not conducted by the Eurostat–Organisation for Economic Co-operation and Development (OECD) PPP Programme, as the Programme follows an output approach for total education.
Housing survey and related data
This survey collects annual rental prices and dwelling stock data. Four basic headings within the ICP expenditure classification require data on rentals:
• Actual rentals for housing
• Imputed rentals for housing
• Housing under individual consumption expenditures by NPISHs
• Housing under individual consumption expenditures by government
Since these last two basic headings use reference PPPs derived from the first two basic headings listed, it is sufficient to focus on how to compute PPPs for actual and imputed rentals. Actual rents are the rents that tenants pay to the owner of the dwelling they are leasing. Imputed rents are estimates of the rents that owner-occupiers would have to pay for their dwelling were they renting rather than owning the dwelling. The SNA requires that households’ housing expenditures include both the actual expenditure on rents and an estimate of the rent that the owners would have to pay if they were obliged to rent (imputed rents).
The PPPs for housing services can be calculated either directly, using the rental (price) approach, or indirectly, using the dwelling stock (volume) approach, or through a combination of both approaches (mixed rental and volume approach). The survey was designed to collect data for all three approaches, in the form of rental prices for different types of dwelling and dwelling stocks (volumes).
Government consumption
This survey collects prices for the compensation of government employees, which comprises the basic salary or wage, allowances, and cash payments over and above the basic salary or wage, income in kind, and the employer’s actual and imputed social security contribution. The sources of the data reported are the administrative government pay scales for each of the selected occupations or dedicated surveys on the compensation of government employees. The GCL defines these occupations using job descriptions taken from the International Labour Organization’s International Standard Classification of Occupations 2008.
Gross fixed capital formation
bacco, clothing, footwear, utilities, furniture, household appliances, pharmaceuticals, private health care services, motor vehicles, transportation services, electronic equipment, communication services, catering services, accommodation services, recreational activities, personal hygiene, and other goods and services. For this survey, each economy classifies the items priced as important or less important for the consumption patterns of its inhabitants. The items marked as important have a
Machinery and equipment
This survey collects prices for machinery and equipment typically used in a variety of industries. The GCL includes one item identified by brand and model and another generic item with the exact same characteristics, but not identified by brand and model. For consistency with national accounts, prices for equipment goods that are consistent with the valuation of those goods as fixed capital assets in the national accounts are required. Thus, the prices must include the import duties and other taxes actually paid by the purchaser, the costs of transporting the asset to the place where it will be used, and any charges for installing the asset so that it will be ready for use in production. Deducted from the price are the discounts generally available to most purchasers.
Construction and civil engineering
This survey collects prices for inputs to construction work, including materials, equipment hire, and labor. The prices provided are those paid by construction contractors to their suppliers. For materials, these are typically the prices paid, after discounts, to manufacturers or intermediaries (agents or merchants), including all nonrecoverable taxes and excluding all recoverable taxes such as a value added tax (VAT). For equipment, prices are the rental charges paid to hire companies or internal hire rates. For labor, these reflect the cost to the contractor of employing workers. In addition, resource weights for each input component (materials, equipment hire, labor) for typical residential, nonresidential, and civil engineering projects are collected.
Price data validation
Similar to the process for national accounts, the validation process for price data comprises three distinct stages. The first is the intracountry or national validation stage, during which the prices collected by a single economy are edited and verified. The second is the intercountry or regional validation stage, during which the prices collected by all economies participating in a regional comparison are edited and verified. The third is the interregional, or global, validation stage, during which the prices that have been collected for global core items from the GCL and have already been edited and verified withi regions during the intercountry validation are edited and verified across all economies and all regions.
This process is repeated over several rounds, since changes and revisions to price data from one economy impact the PPPs calculated for all other economies. Once errors are found and corrected, overall results need to be recalculated, and a new validation round begins. The new results, once cleared of major errors, may reveal mistakes that were not previously detected. This process repeats itself until the final price data are deemed reliable.
It should be stressed that validation procedures are complementary to good survey practices. Data quality depends to a large extent on the design and management of each price survey. Price collections must be planned carefully, carried out efficiently, and supervised properly. Item specifications must be sufficiently detailed to enable price collectors to identify items unambiguously in the outlets they visit. Any difficulties arising with each price survey should be documented and reflected in the design and conduct of future surveys.