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Accuracy and reliability

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Prices and Consumption, Economic Statistics
Nicklas Elversøe
+45 3917 3142

nel@dst.dk

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Producer and Import Price Index for Commodities

The prices covered by the data collection have a direct coverage of approximately 70 percent of total revenue in the Danish economy. Weights are based on the National Accounts product balances, which covers the main part of trading in the first stage of sales within the delimitation of the statistics. Sample units are selected on a purposive basis using a top-down approach. As a random sampling method is not being utilised a subsequent assessment of sampling error is not enabled.

Published statistics are considered final.

Producer and import price index for commodities are not considered to have an increased uncertainty due to COVID-19. Data collection has been largely not impacted as a result of the crisis and subsequent non-response levels have remained at their historically low levels.

Overall accuracy

Prices are collected for approximately 1100 groups of commodities covered by approximately 6800 price series. The samples for each commodity group are selected top-down to achieve as high turnover coverage as possible. Within each of these commodity groups the largest companies, measured on turnover, are selected. Each of those companies are asked to report the prices of their most representative commodities based upon revenue or the amount sold/import within the given commodity group. Therefore, it is assumed that the price developments in the samples expresses the price developments in the whole population.

The weight are based on the National accounts balances for 2018, which is based on multiple in-house primary sources (Purchases and sales by enterprises, Production and turnover in manufacturing industries. Retail Trade and International Trade etc.). This covers most of all the trade in Denmark and it is assessed to been representative of the Danish economy.

Sampling error

A purposive (top-down) sampling technique is utilised focusing on businesses that represent the largest shares of transactions within a given stratum. This method is accepted in international guidelines but as this is not a random sampling technique and no sampling error metric can be estimated.

Non-sampling error

In the second quarter of 2020 Denmark experienced social restrictions due to Covid-19 shutdowns. In subsequent periods societal constraints were lifted and reinstated on a needs basis. Despite these times of shifting restrictions it has been possible to publish the producer and import price indices as per the planned schedule. The non-response experienced is largely unchanged in relation to comparable periods before the pandemic and the index is therefore not considered to have an increased uncertainty as a result of Covid-19.

As time goes by, some replacement of the commodities included in the calculations occurs. When new products enter and have a different quality than the commodities exiting normal quality change practices are applied. When replacing commodities, the new product is first included in the price calculation when two consecutive price observations are available for the product concerned. In cases where price changes only take place at the same time as quality changes, this can give rise to imbalances. Methods for handling quality changes are described in more detail in the IMF's manufacturer price index manufacturer price index (Producer Price Index Manual - Theory and Practice). Statistics Denmark applies quality adjustments on a case-by-case basis and uses the best method that the data and provider contact enables.

A further general observation is that there may be cases where obsolete commodities stay too long in the sample and that new commodities are introduced too late. The companies are requested both continuously, but also systematically, approximately every two years, about reviewing the commodities that they report prices in relation to whether they are still representative of the company's general sales or imports. If this is not the case they are requested to replace obsolete commodities with new ones. Errors may also arise if a company reports a price for a wrong item. This is usually due to misunderstandings, for example, in connection with staff changes in the company reporting. In addition, errors can occur in connection with the registration of completed forms at Statistics Denmark. Such potential errors are both assessed via automated and manual means and are not considered to be a source of significant errors.

The price index is calculated as a fixed commodities basket index of the Laspeyres-type. This means that, in the calculation of the index, an unchanged composition of goods through time is assumed. In the real world, companies substitute between products for various reasons (e.g. changed relative prices, preferences or technology). This means that the calculated price development in the price index may lose representativeness over time where undetected commodity changes are taking place. This is attempted to be minimized by sample updates every five years, as well as companies being requested both continuously (monthly data validation) and systematically, approximately every two years, about reviewing the commodities that they report prices (the fixed commodities basket) in relation to whether they are still representative of the company's general sales or imports.

The monthly non-response is less than 1 per cent. It is therefore not considered to be a major source of error. If the non-response should take place for essential commodities, imputation is used where the non-response price development is imputed with the development of the elementary aggregate they belong (class mean imputation). In other cases, prices are considered unchanged (carry forward imputation is utilized).

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

Overall the indices of the Producer- and Import Price Index of Services is assessed to be of high quality and representative of the price development in the population, i.e. the price development of goods sold by Danish producers and of goods bought by Danish importers. This assessment relies on the data used for the index, which consists of 6800 prices distributed on approximately 1100 commodity codes which covers at least 70 pct. of the total revenue in the population. This together with the weights encompasses the main part of all Danish trade as well as the continuously monitoring of the quality of the sample.

There are large differences between the commodity- and industry groups that the Producer and Import Price Index for commodities covers. There is great variation in the number of companies from group to group. In some groups it is possible to cover a large amount of turnover with a small sample, whereas in others, it is difficult to cover a small amount of turnover even with a large sample. Hence it is not possible to determine a common quality benchmark across all groups, and the quality will vary more for more disaggregate indices.

A comprehensive quality assessment is therefore based on a combination of assessing turnover coverage, the number of companies and prices in the sample and the quality of the collected prices, including the pricing methods used. The quality of the statistic is being continually monitored and improvements are made where it is assessed that the quality can be levered. Conducting quality work therefore includes making replacements within- and increasing the sample with more respondents. Asking existing respondents to report more prices, or use better pricing methods to define and calculate prices.

Furthermore, the quality of this statistic can be assessed by to what extent the statistic is relevant, accurate and reliable, timely and punctual, comparable and accessible to the users. You can read how the index lives up to these goals in the sections with the corresponding headlines.

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.