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Accuracy and reliability

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Prices and Consumption, Economic Statistics
Martin Birger Larsen
+45 3917 3459

mbl@dst.dk

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Net Price Index

No calculation has been made of the uncertainty connected with sampling in the index of net retail prices as the sample is not randomly drawn, but the quality of the index of net retail prices is accessed to be high.

In addition to the "general" uncertainty connected with sampling, there are a number of sources of potential bias in the consumer price index. One source is the consumers substitution between goods and shops and another source is changes in the sample (se chapter regarding "Non-sampling error").

Overall accuracy

The overall reliability of the index of net retail prices is estimated to be high based on the views of users.

The accuracy of the total index of net retail prices is judged by Statistics Denmark to be within plus/minus 0,1 index points.

Sampling error

No calculation has been made of the uncertainty connected with sampling in the index of net retail prices as the sample is not randomly drawn.

Outlets in the sample is to a large extent selected based on turnover so that firms with a high turnover are being preferred compared to firms with a low turnover (cut-off sampling). Representative goods for the different goods and services are being selected according to expenditure measured by e.g. the Household Budget Survey.

The particular goods in the sample including brand and product weight are being selected by the price collector or data provider.

Non-sampling error

In addition to the "general" uncertainty connected with sampling, there are a number of sources of potential bias in the index of net retail prices, which can be grouped as follows:

Substitution between goods:Bias due to substitution between goods is a result of the fact that for different reasons (changes in income and in relative prices or preferences), consumers substitute between different goods, although an unchanged composition of consumption is assumed in the calculation of the price index. The index of net retail prices is calculated as the weighted arithmetic average of the most detailed price indices (elementary aggregate indices) with their respective budget shares used as weights. At this level of the index calculation no allowances are therefore made for the consumers' substitution between different groups of goods and services (elementary aggregates). However, the elementary aggregate indices are mainly calculated as geometric indices. Thus, it is assumed that the consumers' budget shares remain unchanged. For these groups a certain substitution has thus been recognized in the index.

Substitution between shops: This type of bias arises when consumers for the same commodity change from shops with high prices to shops with lower prices. The index of net retail prices is calculated monthly on the basis of price information from the same shops. If, e.g. greater shares of the consumers' expenditure from July until August is accounted for by discount shops with lower prices, this will not in itself have an impact on the index.

Changes in quality: In calculating a price index it is assumed that the baskets of goods that are compared are identical, also with respect to the quality of the goods. Consequently, in the case of changes in quality the prices should, in principle, be adjusted for this. As the value of the actual changes in quality is not known, it is naturally difficult to calculate exact values for bias, due to lack of quality adjustment.

New commodities: The sample for the index of net retail prices is continuously updated, but for practical reasons often with a certain time lag. This means that new products are frequently not included in the compilation of the index when they are first introduced on the market, and not until prices have been available for two months in succession. Furthermore, at the beginning of a product's lifetime it is often impossible to obtain any information about expenditure from e.g. the Household Budget Survey. Finally, a great deal of uncertainty is associated with the task of defining whether it is actually a new product or just improved versions/varieties of already existing products.

Quality management

Statistics Denmark follows the recommendations on organisation and management of quality given in the Code of Practice for European Statistics (CoP) and the implementation guidelines given in the Quality Assurance Framework of the European Statistical System (QAF). A Working Group on Quality and a central quality assurance function have been established to continuously carry through control of products and processes.

Quality assurance

Statistics Denmark follows the principles in the Code of Practice for European Statistics (CoP) and uses the Quality Assurance Framework of the European Statistical System (QAF) for the implementation of the principles. This involves continuous decentralized and central control of products and processes based on documentation following international standards. The central quality assurance function reports to the Working Group on Quality. Reports include suggestions for improvement that are assessed, decided and subsequently implemented.

Quality assessment

The statistical uncertainty is not calculated, but the quality of the index of net retail prices is accessed to be high based on the views of users.

The level of quality is among other things dependent on the size and composition of the sample, the methods used for quality adjustments in connection with changes in the sample and the data editing of the collected data.

Data revision - policy

Statistics Denmark revises published figures in accordance with the Revision Policy for Statistics Denmark. The common procedures and principles of the Revision Policy are for some statistics supplemented by a specific revision practice.

Data revision practice

Only final figures are published.