Israel measuring food price statistics incorrectly

supermarket  picture: thinkstock

A "Globes" investigation shows major differences between the statistics and the real prices.

Is the Central Bureau of Statistics incorrectly measuring not only housing prices, as recently reported in "Globes," but also food prices, which comprise 16% of the Consumer Price Index? An examination by "Globes" shows that there are substantial differences between the changes in the food prices index reported by the Central Bureau of Statistics and those reported by companies examining the real figures in millions of deals every month. The reason is that that the Central Bureau of Statistics' food prices index is based on manual sampling at selected points, not on real figures digitally available and accessible to the public at large since the enactment of the Food Law. These figures show a different picture than that reflected in the Consumer Price Index.

How is the Consumer Price Index calculated?

The Consumer Price Index, which measures the percentage change in the amount needed to purchase a fixed basket of goods and services, is one of the most important indices in the Israeli economy. It is used primarily for various linkages, determining the cost of living, for wage rates, and for analyzing price trends in the economy. According to the Consumer Price Index, prices of 1,300 goods and services are collected by people gathering 75,000 observations at 3,500 stores, businesses, and households in 100 communities. The prices of goods are usually collected on location, and service prices are sampled by telephone.

Arguments against Central Bureau of Statistics' measurements

Firstly, manual measurement of prices that does not include existing databases leads to results that do not reflect reality, because it is only an indicator, and does not include all of the consumers' purchases. When the Central Bureau of Statistics' figures are compared with those that weigh much broader data, material differences emerge between the different sets of food prices data. The differences include gaps that are important in the context of monthly price changes, which are the substance of the index measured as the change in prices in comparison with an earlier period.

Sources informed about the true state of prices in the food market say that the Central Bureau of Statistics ignore the momentous developments in recent years in the ability to collect true complete data for the prices paid by the public, as opposed to sample data. This is especially questionable, given the fact that the law requires every supermarket chain to provide daily reports of its price data on the same day, including bargains, for the government database. In other words, these are real sales data, not a sample. It is therefore unclear why the Central Bureau of Statistics does not use them in their calculations.

The differences in and deviations from the real data are important because of the enormous price differences from one chain to another (for example, between the supermarket branches in cities and discount stores). Only by weighing the quantities purchased at every chain can really provide a correct weighted comparison.

It is also being alleged that the Central Bureau of Statistics is still sampling products that are no longer relevant, such as live carp, brandy, and so forth. Another problem is that an annual survey of 10,000 households asked to record their weekly expenses see the task as an imposition and don't collect all their bills.

The Central Bureau of Statistics said in response, "The claims are not correct and demonstrate a lack of sufficient knowhow in the methodology of calculating the Consumer Price Index. Collecting the prices in order to calculate the CPI generally and the price of food in particular is conducted using a range of methods, the most prominent of which is collection information in the field or by telephone as happens in OECD countries."

"It is not clear to us on what the claims are based that the reports on surveys of household expenses are not credible. The data received from the survey is constantly checked by statistical examinations for reliability and validity and compared with, as far as possible, administrative data (data receives from sources outside of the Central Bureau of Statistics) from government ministries, sales data from retail chains, the Israel Electric Corporation and water corporations, telecoms and local authorities. The examinations and audits that are conducted indicate the high credibility of the data received from those who take part in the survey."

Published by Globes [online], Israel Business News - www.globes-online.com - on February 6, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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supermarket  picture: thinkstock
supermarket picture: thinkstock
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