Corona consequences for CPI
Measures taken by the Government to limit the corona outbreak have implications for the Consumer price index (CPI) for April. Large changes in consumption means that several services are treated separately.
Eurostat (the statistical office of the European Union), in close cooperation with Statistics Norway and other National Statistical Institutes, have made international recommendations on how the consequences of the corona epidemic should be handled in the countries' respective CPIs. The guidelines and how the corona measures affect the Norwegian CPI have earlier been presented. For services unavailable for consumption in April, the following solutions have been chosen:
- Price development from March to April for services with zero (or almost zero) consumption in April is estimated with the change in all-item CPI from March to April
- Price development of flights, package holidays and hotel accommodations is estimated with seasonal factors
Services following the price development of all-item CPI
Services related to hairdressing and personal grooming treatments, pubs as well as dentists, theaters, cinemas, museums, fitness centers, sports events, kindergartens and after-school activities are covered in the CPI. Practically all these services were closed in April and therefore the consumption of these services is assumed to be very low or practically close to zero in the CPI.
For all these services of non-availability, Statistics Norway has chosen to estimate prices from March with the development of the all-item CPI from March to April. This approach will implicitly redistribute the weights in the CPI to the goods and services actually consumed in April. This means taking the relevant services out of the CPI.
Services with clear seasonal variations in prices
While making the international guidelines an appropriate treatment of services with clear seasonal pattern in prices, like flights, package holidays and hotel accommodations, was much debated. Such services may partly show strong price fluctuations from month to month, which are repeated year by year. Breaking a clear seasonal pattern may impact the all-item CPI considerably. Special consideration for the use of CPI in indexation and as inflationary target has been emphasized in the formulation of the guidelines. Eurostat therefore recommends estimating seasonal variations for services with a clear seasonal pattern in prices.
Airfares, package holidays and hotel accommodations show seasonal patterns
For flights where prices are collected up to several months in advance, Statistics Norway has chosen not to use these prices due to strict travel advices and limited travel activities. Package holidays in April are assumed to be strongly affected by the travel advices. Both flights and package holidays are therefore considered services of non-availability in April. Hotels were not required to be closed in April, but limited travel activities also resulted in low demand for hotel accommodations and these services are treated in the same way in April.
Statistics Norway finds clear seasonal pattern for the prices of international flights, but not so much for domestic flights. Prices of package holidays and hotel accommodations also show clear seasonal patterns. For April, Statistics Norway has therefore chosen to estimate prices for international flights, as well as package holidays and hotel accommodations, with seasonal factors. For domestic flights, prices from March are adjusted with the change in the all-item CPI from March to April. Monthly seasonal factors are estimated based on the time series of these services by using recognized methods.