ICP Price Data


Coverage of surveys

Household Individual Consumption: Main Survey

Household Individual Consumption: Housing

Government Consumption

Gross Fixed Capital Formation: Machinery and equipment

Gross Fixed Capital Formation: Construction

Special considerations for Actual Individual Consumption

Price data validation

 

Coverage of surveys

Economies participating in ICP 2011 collected prices for a selection of the goods and services that make up the final consumption expenditure and gross fixed capital formation. The four principal price surveys that economies conduct cover (1) consumer goods and services (also known as the main price survey), (2) compensation of employees paid by general government to employees producing individual and collective services, (3) machinery and equipment, and (4) construction and civil engineering (all described in the separate sections that follow). Because the household consumption expenditure accounts for over 60 percent of GDP in the majority of economies, the most important of the four price surveys is the survey of consumer goods and services. It includes a wide assortment of products, ranging from food, beverages, clothing, footwear, electricity, furniture, and household appliances to motor vehicles, transport services, audiovisual and information processing equipment, restaurants, hotels, and hairdressers.

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Household Individual Consumption: Main Survey

In the ICP, PPPs are calculated based on the national annual average prices of a set of predesignated products and services.

Linking the regions into a global comparison is achieved by using global core products—that is, products that have been selected for the specific purpose of providing links or overlaps between the regional comparisons in which they are priced. Global ICP Units compiled a list of global core products in consultation with regional and national implementing agencies and, in the case of the special price surveys, with subject matter experts. Structured product descriptions (SPDs) are used to define the price-determining characteristics of the products. Considerable effort was made to ensure that the list was not dominated by the products of any one region and that the products are global so that they could be priced across most if not all regions.

For the main price survey, regions developed their own regional product list by revising their regional product list from previous ICP exercises. The global core products were combined with those on the revised regional lists, and care was taken to avoid duplication. Inclusion in the final regional list depends on a product’s availability within the region (the number of economies in the region that could price it) and on its importance within the region (the number of economies in the region that could price it and for which it was important). Global core products selected for the final regional list are treated as regional products meeting the same validation criteria and included in the calculation of regional PPPs.

The household consumption main survey covers all consumer goods and services except housing services, private health, and private education; special surveys are organized for these areas (these surveys are described in the sections that follow). Prices for the main survey are collected from a sample of outlets in rural and urban areas. Most economies collect prices quarterly throughout a benchmark year.

Operational materials:

Further resources:

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Household Individual Consumption: Housing

According to ICP Classification, three categories relate directly to dwelling services. Under these categories, there are four basic headings: “actual rentals for housing”, “imputed rentals for housing,” “housing” (under NPISH consumption) and “housing” (under government consumption) require price data on rentals. For the rest of the basic headings related housing, economies collect prices through the household final consumption survey. Because the “housing” basic headings, under the NPISH and the government sections, use the PPPs for “actual rentals for housing” and “imputed rentals for housing” as reference PPPs, it is sufficient to focus on how to compute PPPs for actual and imputed rentals.

What distinguishes dwelling services from other segments of the ICP and makes them comparison-resistant is that the price collection method is not straightforward. To further explain, dwellings fall into two subsets—rented dwellings and owner-occupied dwellings. For rented housing, it is easier to tell how much tenants are paying for dwelling services, whereas owner-occupied housing is more complex. Regardless, households' consumption expenditures should include both the actual expenditure by households on rents for dwellings and an estimate of how much owner occupiers would have to pay if they had to pay rent for their dwellings instead of owning them, as defined in the System of National Accounts (SNA).

The standard method for calculating PPPs for dwelling services is exactly the same as that for any other service: PPPs are obtained by averaging price relatives (in this case rent relatives) for identical, or very similar, dwelling services in each economy. This method has been found to work well in economies in which the dwellings actually rented are representative of the stock of dwellings as a whole and in which the statistical agencies collect information on rents paid for the different kinds of dwellings that are rented in most parts of the economy.

In economies that do not apply the rental equivalence method, the PPPs for housing services are obtained indirectly using the quantity approach. Estimating the volume of housing services directly by the quantity approach involves first calculating a measure of relative quantity and a measure of relative quality between economies. Subsequently, the quality measure is used to convert the quantity measure into a real expenditure (volume) measure. Therefore, for the quantity approach the special survey on housing services collected data on the quantity and quality of the housing stock.

Operational materials:

Further resources:

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Government Consumption

Government provides households with both collective and individual services. Collective services are produced by government, whereas individual services can be produced by government, or they can be purchased by government from market producers. The individual services that government purchases from market producers are called market services. Their outputs can be valued and their PPPs calculated using the economically significant prices at which they are sold. The collective and individual services that government produces itself are nonmarket services. They are not sold at economically significant prices, and, in the absence of such prices, their outputs are valued by summing the costs of their production, and their PPPs are calculated using the prices of inputs. In practice, prices are collected only for the most important input, compensation of employees. Reference PPPs are used for the other inputs.

ICP comparisons use the input price approach to compute PPPs for collective services and for the two most important individual services produced by government: health and education. Reference PPPs are used for the other individual services produced by government—housing, recreation and culture, and social protection.

The ICP survey of the compensation of government employees covers a selection of occupations in collective services, public health services, and public education services. This selection was made so that they represent the various education and skill levels that are commonly found among employees working in these three government services. The occupations are defined using job descriptions taken from the International Standard Classification of Occupations 2008 (International Labor Office). These descriptions specified the occupations in terms of the kind of work done.

The national coordinators were expected to provide the compensation of employees for as many of the selected occupations as possible. Compensation of employees as defined in System of National Accounts comprised the basic salary or wage, allowances and cash payments over and above the basic salary or wage, income in kind, and the employer’s social security contribution. The national coordinators were required to use official government pay scales to determine the compensation of employees in the selected occupations.

Operational materials:

Further resources:

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Gross Fixed Capital Formation: Machinery and equipment

The standard method for pricing machinery and equipment goods is similar to that followed for consumer goods and services: economies collect prices for identical or very similar products—sometimes referred to as specification pricing.

The ICP survey for machinery and equipment use the global product specifications including specifically-branded and unspecified, generic products for each cluster. National coordinators are asked to provide prices for each available product, provided that the model specified was available and in common use in the economy. If more than one model could be priced on this basis, then national coordinators are asked to do so. In the cases in which exact product matches could not be found, each economy prices a model that broadly meets the specifications and is commonly used in the economy.

The prices of equipment goods can be obtained directly from producers, importers, or distributors, or from their catalogs. Prices are collected by the method or combination of methods that economies deem the most convenient such as personal visit, telephone, letter or the Internet. For consistency with national accounts, economies are required to provide prices for equipment goods that are consistent with the valuation of those goods as fixed capital assets in the national accounts. Thus, the prices must include the import duties and other product 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 it will be ready for use in production. Deducted from the price are any of the discounts generally available to most producers.

The prices reported should be the national average prices for the reference year—that is, they should be the average of the prices collected at regular intervals throughout the year. However, experience shows that if all economies price equipment goods during the same period, there is no need to collect prices throughout the year.

Operational materials:

  • ICP Machinery and equipment, Data Collection Form

Further resources:

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Gross Fixed Capital Formation: Construction and Civil Engineering

Construction PPPs are calculated using input prices for construction (i.e. the prices paid by construction contractors for the inputs to construction work such as material prices, equipment hire rates, and costs of labor). The prices provided should be those paid by construction contractors to their suppliers. For materials and products, these are typically the prices paid, after discounts, to manufacturers or intermediaries (agents or merchants), including all non-recoverable taxes and excluding all recoverable taxes such as the value added tax (VAT). For equipment, prices should be the rental charges paid to hire companies or internal hire rates, and for labor the cost to the contractor of employing workers. Informal payment arrangements for labor are common in construction—for example, some payment is in the form of wages, subject to taxes and on which employers' costs are incurred, and other payments are in cash (respondents to the construction survey should bear this in mind when determining what an "average" wage is).

The prices should be national average prices in national currency. Annual averages are prices that are an average over the survey year (midyear prices are acceptable) and that average different price levels across the economy and across different types and sizes of projects.

Note that historically, the ICP has used an output method for price construction. It involved specifying models in bills of quantities for various construction projects such as a dwelling, a factory, or a bridge. For the 2005 round, the ICP changed the approach, mainly due to the greater number of participating economies and the cost of collecting price data for the various models specified in previous rounds. It used the basket of construction components (BOCC) approach instead. However, due to limitations in data collection and validation, a revised approach was adopted for ICP 2011.

The current ICP construction and civil engineering survey is based on an input approach in which countries priced approximately 50 basic and common resources for construction work that were selected to correspond with the main inputs to national construction output. In addition, respondents to a national survey provide information on importance, resource mixes, typical markups and professional fees, and approximate project prices. These data are used to calculate and validate the construction and civil engineering PPPs.

Operational materials:

Further resources:

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Special considerations for Actual Individual Consumption

One aggregate below the level of GDP that has particular significance in ICP comparisons is actual individual consumption (AIC). On a per capita basis, it is a better measure of material well-being than either GDP or household final consumption expenditure when material well-being is defined in terms of the goods and services consumed by households to satisfy their individual needs.

In some economies, governments or non-profit institutions serving households (NPISHs) provide the greater part of health and education services and these expenditures are included in the individual consumption expenditure of government or NPISHs. In other economies, households purchase nearly all health and education services from market producers and these expenditures are included in individual consumption expenditure of households. In these circumstances, individual consumption expenditure of households is not the correct measure with which to compare the volumes of individual goods and services actually consumed in different countries. Households in countries where government or NPISHs are the main providers of health and education services will appear to consume a smaller volume of goods and services than households in economies where households pay directly for the bulk of these services.

To overcome this problem, the ICP has added the individual consumption expenditures of government and NPISHs to the individual consumption expenditure of households to derive a measure of all the goods and services actually consumed by households. It covers all such goods regardless of whether they are purchased by households themselves or are provided as social transfers in kind by government or NPISHs.

In ICP 2011, basic heading PPPs were calculated on the basis of actual individual consumption for the following analytical categories: health; education; housing, water, electricity and other fuels; recreation and culture; and miscellaneous goods and services.  

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Price data validation

Validation procedures, which have been developed throughout the various ICP rounds, are carried out first at the national level to ensure intra-country data quality, subsequently at the regional level to ensure inter-country data quality, and finally at the global level to ensure inter-country data quality across regions.

The objective of intra-country validation is to verify that price collectors within the same country have priced products that match the item specifications and that the prices they have reported are correct. These checks are carried out without reference to the price data of other countries.

Inter-country validation is a collective validation stage involving the regional and national implementing agencies, and it is designed to ensure that collected prices are comparable and that item specifications have been interpreted in the same way across countries. The inter-country validation is an iterative process requiring a number of rounds of editing and verification. Possible errors are uncovered by identifying prices that diverge significantly from other prices in the dataset. When errors are identified, and corrected, the parameters of the price dataset will change, and subsequently, divergence measures of each price remaining in the dataset will change. A second edit will find new possible errors that will need to be verified. Again, when actual errors are corrected, the parameters of the price dataset will change, which may lead to more possible errors being detected if a third edit is done. After each round, as incorrect or incomparable prices are removed or corrected, the PPPs will become more reliable.

After the data are validated at the country and regional levels, the final validation stage is the global validation in which the regional and global implementing agencies verify the quality of regional PPPs, prices collected for global prices and subsequent inter-regional linking factors, and overall soundness and economic validity of the global PPPs. As the regional validation stage, the global validation stage is conducted through an iterative process, consisting of several rounds of review and editing.

In general, price validation processes have two main objectives. The first objective is to clear data of pricing errors. Two types of non-sampling pricing errors can be identified. These are price error and product error. A price error occurs when price collectors price products that match the item specification, but they fail to record the price, or related quantity or unit of measure, correctly. A price error can also occur during the process of reporting and transmitting a price that was initially recorded correctly. A product error occurs when price collectors price products that do not match the item specification and neglect to report having done so.

The second objective is to ensure comparability of prices. The purpose of the price comparison is to compare comparable products, or in other words "likes with likes." Incomplete, unclear, or item specifications that are too loose may introduce product errors because the products whose prices are being compared may not be truly comparable. For example, if a generic item specification—that is, a specification that does not define the brand and model to be priced—is used, it may embrace a wider range of products than was intended when the specification was created. In this case, errors may be introduced into the estimated PPPs because products priced between countries differ significantly in their price determining characteristics, such as brand and model. The role of the regional and global implementing agencies is to ensure that collected prices are comparable within the region and across the regions, by analyzing both the price data and resulting PPPs. Because product errors at the regional or global levels may not be errors per se at the country level, close collaboration between the implementing agencies is a necessity.

Overall, it should be stressed that prevention is preferable to correction; the incidence of non-sampling errors can be significantly reduced through good survey design and management. Price collections must be carefully planned, efficiently carried out, and properly supervised. Item specifications must also be sufficiently detailed to enable price collectors to identify products unambiguously in the outlets they visit. In other words, validation procedures complement good survey practices.

Further resources:

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