Prices
The object of price statistics is to measure price development and the price level on the key goods markets of a national economy. Goods in this context may be both products and services. Frequently, the task is to measure price development over time, while a spatial price comparison is geared to calculating price level differences between regions.
Price indices serve as a suitable instrument for measuring prices, and depict price ratios in the period under review compared to the previous or base period; in the case of a spatial comparison, they measure the price level of one region relative to a comparison region. Price indices are usually calculated at very short time intervals (monthly, quarterly) and are thus key short term indicators. For the general public they serve as a measure of overall price changes. They are furthermore used for macroeconomic analyses and form the basis for many decisions concerning economic and monetary policy. Viewed in the longer term (annual, longer times series), they provide information about the stability of monetary value, one of the reasons why they are often also consulted with respect to valorisation in contracts (indexation clauses).
Price developments are measured at the different stages of the economic process. At the production stage, there are producer price indices for agricultural and forestry products, for industrial (commercial) products, for business services, and for the construction industry. At the distribution stage, there are the wholesale price indices and the foreign trade price indices (import price indices, export price indices).
As an indicator of the average price change of all goods and services bought and/or used by households for consumption purposes, the consumer price index serves as the measure of inflation. The harmonised index of consumer prices, which is more suitable for international comparisons, is subject to a slightly different methodological concept and is used in the EU context to calculate average EU or Eurozone inflation. At the intermediary level (investors), the price indices for machinery reflect price trends relating to goods which companies invest during the production process.
Finally, purchasing power parities (PPPs) are calculated in order to measure the purchasing power of the domestic euro abroad. They are nothing more than the price ratios for comparable goods and services in Austria and abroad. They can be used to calculate the relative price level of goods and services in different countries on the base of a common basket of goods.
Together, the price indices listed above form a system of indices that not only allows price development on the different markets to be monitored and portrayed statistically, but also, and most importantly, enables conclusions to be drawn about price trends in the economy as a whole. The fact that goods and services at the individual economic stages are subject to a value added process means that the individual price indices are never independent but, rather, interdependent. This fact is of importance to economic analysts and forecasters, because it provides information, for example as to whether and to what extent increases in raw material prices impact on consumer prices.
All of the indices referred to above are based on the Laspeyres method, which means that the current prices of a pre-defined range of goods and/or services (“basket of goods”) are compared to those of the base period (price in base year = 100), with the weighting remaining constant. The base period can be either December of the given year (chained index) or an earlier period (fixed-base index). For all price indices it is important that the computation takes account of the pure price changes only; in other words, changes in all other parameters of a product or service must be eliminated or excluded (quality adjustment). The detailed price ratios (index numbers) calculated in this way are used to calculate weighted average index numbers and -via subsequent aggregation stages- an overall price index using information on the relative share of the individual goods in terms of sales and expenditure (their weighting).
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