8
Examples of Overall (total) Index
4.4 Periodicity and Frequency of Rebasing of the Indices The Producer Price Index (PPI) is compiled on both a quarterly and annual basis, in order to monitor short - and medium -term trends in producer prices. The quarterly indices provide timely insight into price movements at the production level, allowing for m ore frequent analysis of inflationary pressures across key sectors. The annual indices are derived as the simple arithmetic average of the four quarterly indices within a given calendar year, offering a broader view of price trends over time and smoothing out short- term fluctuations that may occur due to seasonal or temporary market conditions A key feature of the PPI is that it is published with a broad industry breakdown, specifically at the 2 -digit Division level of the International Standard Industrial Classification (ISIC Rev. 4). The quarterly indices are released six weeks after the end o f the reference quarter, allowing timely access to price data at an industry level. The initial set of indices was compiled for the December 2018 quarter, and the series has since been progressively extended each quarter to maintain continuity and coverage. In line with international statistical standards, the PPI is planned to be rebased every five years. The rebasing process uses the most recent finalized data from either the Annual Survey of Industrial Production (ASIP) or the Census of Industrial Producti on (CIP). During this process, the ISIC-based industry values used in the PPI are revalued to reflect prices in the new reference base period, ensuring that the index remains relevant and reflective of current production structures and pricing dynamics.
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4.5 Data Collection and Pricing Point A timely mid-quarter collection of producer prices is essential to compile a Producer Price Index (PPI) that complies with IMF Data Dissemination Standards (DSDS). This timely data enables policymakers to receive an early indicator of downstream household inflation and supports the accurate calculation of contemporary national accounts volume estimates, thus facilitating informed economic decision-making. 4.5.1 Data Collection Procedure Price data collection is conducted using paper-based questionnaires distributed to selected establishments. Field interviews are carried out by trained enumerators who operate under the supervision of regional office staff to ensure data quality and consistency. Upon completion, the filled questionnaires are forwarded by mail to the National Bureau of Statistics (NBS) headquarters for processing and compilation. 4.5.2 Point in Time Pricing The pricing point is set as the 15th day of the middle month of each quarter, or, if this falls on a non-trading day, the nearest previous trading day or the nearest previous day on which a transaction occurred. This pricing point is referred as point in time. Prices are collected at the ex-mine or ex-factory level, using a valuation basis of basic prices, which excludes trade and transport margins as well as value-added tax (VAT). This approach ensures that the index reflects pure producer price movements without downstream distribution costs or taxes. 4.5.3 Key issues for Product Pricing During Data Collection Interviewers must carefully observe the following guidelines when collecting product prices to ensure accuracy and consistency: i. Use actual transaction prices recorded at the basic price level (e.g., ex-mine, ex-factory), which means prices should exclude trade and transport margins, as well as value-added tax (VAT); ii. Prices should ideally reflect those as of the 15th day of the middle month of
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the quarter, or, if this date falls on a holiday, the nearest preceding trading day; and iii. In cases where sales are infrequent, interviewers should select a transaction that occurred on a day as close as possible to, but not later than, the 15th of the middle month.
4.6 Price Data Editing and Analysis Procedures
4.6.1 Data Editing Reported prices undergo a thorough editing process to ensure data accuracy and consistency. This includes: i. Confirming reported price changes by verifying their validity and obtaining explanations for significant fluctuations. ii. Reviewing any price movements linked to changes in product specifications or other quality adjustments to avoid capturing quality- driven price effects as pure price changes. iii. Comparing price changes across different product specifications within the same establishment, as well as between establishments classified under the same elementary aggregate, to identify inconsistencies or anomalies. Outliers, defined as price increases of 5% or more, are carefully scrutinized, and any price decreases are verified with respondents. Data are then edited accordingly, with credible reasons documented for any adjustments made. 4.6.2 Producer Price Index Analysis The analysis of the Producer Price Index (PPI) focuses on identifying the key drivers behind price changes over the last quarter and the previous year. This involves determining which industry groups or product classes referred to as main moving aggregates contributed most significantly to the observed index movements. By assessing both the magnitude of price change and the relative weight of each aggregate, the analysis
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reveals their contribution to upper -level indices and the overall PPI. This helps to distinguish between short-term fluctuations and long-term trends. 4.7 Quality Adjustment To ensure that prices reflect constant quality, the direct comparison method and expert judgment are commonly employed during the data editing phase of PPI compilation. These methods help isolate pure price movements from those caused by changes in product specifications or quality. Direct Comparison Method is used when the replacement product is identical or nearly identical to the previously priced item and expert judgment is applied when there are observable quality changes, but quantifiable data on the value of the change is lacking. If quality changes are not identified and adjusted, the index may reflect value differences rather than actual price changes, compromising its accuracy and reliability. 4.8 Treatment of Missing Prices Consistent and standardized statistical methods are applied to address missing price data, whether due to temporary unavailability or seasonality of the product. Proper handling of missing prices is essential to maintain the continuity and accuracy of the Producer Price Index (PPI). 4.8.1 Temporarily Missing Prices When a price is temporarily unavailable, imputation is generally based on the price movement of similar products. Preferably, imputation is done using the price changes of similar products sold by the same establishment. If not available, data from other comparable establishments are used. In cases where the product historically exhibits stable pricing patterns (e.g. changes once annually), the last reported price may be carried forward.
4.8.2 Missing Prices for Seasonal Products For seasonal items not sold year-round, prices are imputed using the price movement of comparable products that are in-season during the same period. These may include both 12
similar seasonal products and related items sold throughout the year. Importantly, even
if a product is generally out -of-season, actual transactions may still occur; if so, these
transaction prices are used in the index.
4.8 Conclusion
The Producer Price Index (PPI) is a vital economic indicator that measures average
changes in prices received by producers for goods and services over time. Its accuracy
depends on a sound methodological foundation, including consistent data collection,
classification by industry, use of fixed -base weighting (Laspeyres), quality adjustment,
and rigorous data validation. Maintaining constant quality, timely updates, and
alignment with national accounts ensure that the PPI reflects true price movements. A
well-constructed PPI supports informed decision -making for policymakers, businesses,
and researchers, offering early signals of inflationary trends and contributing to effective
economic planning and analysis.
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4.9
Appendices
The following are Producer Price Index (PPI) weights based gross output data derived
from 2015 Annual Survey of Industrial Production:
Appendix 1: PPI weights of ISIC Level Four
ISIC Level 4
Industrial activity description
Weight (%)
0729
Mining of other non-ferrous metal ores
15.7
0810
Quarrying of stone, sand and clay
0.2
0893
Extraction of salt
0.0
0899
Other mining and quarrying n.e.c.
3.1
1010
Processing and preserving of meat
0.4
1020
Processing and preserving of fish, crustaceans and
molluscs
1.7
1030
Processing and preserving of fruit and vegetables
1.9
1040
Manufacture of vegetable and animal oils and fats
4.3
1050
Manufacture of dairy products
0.2
1061
Manufacture of grain mill products
5.1
1071
Manufacture of bakery products
0.5
1072
Manufacture of sugar
2.3
1079
Manufacture of other food products n.e.c.
2.8
1080
Manufacture of prepared animal feeds
0.3
1101
Distilling, rectifying and blending of spirits
1.2
1102
Manufacture of wines
0.5
1103
Manufacture of malt liquors and malt
4.6
1104
Manufacture of soft drinks; production of mineral
waters and other bottled waters
5.7
1200
Manufacture of tobacco products
3.3
1312
Weaving of textiles
1.2
1313
Finishing of textiles
0.1
1391
Manufacture of knitted and crocheted fabrics
1.4
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1394 Manufacture of cordage, rope, twine and netting 0.5 1410 Manufacture of wearing apparel, except fur apparel 0.1 1420 Manufacture of articles of fur 0.0 1512 Manufacture of luggage, handbags and the like, saddlery and harness 0.2 1520 Manufacture of footwear 0.1 1610 Sawmilling and planing of wood 0.9 1622 Manufacture of builders' carpentry and joinery 0.0 1623 Manufacture of wooden containers 0.1 1629 Manufacture of other products of wood; manufacture of articles of cork, straw and plaiting materials 0.3 1702 Manufacture of corrugated paper and paperboard and of containers of paper and paperboard 0.2 1709 Manufacture of other articles of paper and paperboard 2.1 1811 Printing 1.2 1812 Service activities related to printing 0.0 1820 Reproduction of recorded media 0.0 1920 Manufacture of refined petroleum products 0.3 2011 Manufacture of basic chemicals 0.2 2012 Manufacture of fertilizers and nitrogen compounds 0.0 2022 Manufacture of paints, varnishes and similar coatings, printing ink and mastics 0.8 2023 Manufacture of soap and detergents, cleaning and polishing preparations, perfumes and toilet preparations 1.9 2029 Manufacture of other chemical products n.e.c. 0.0 2100 Manufacture of pharmaceuticals, medicinal chemical and botanical products 0.4 2219 Manufacture of other rubber products 0.0 2220 Manufacture of plastics products 2.6 2310 Manufacture of glass and glass products 1.0
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2392 Manufacture of clay building materials 0.1 2394 Manufacture of cement, lime and plaster 3.9 2395 Manufacture of articles of concrete, cement and plaster 0.7 2399 Manufacture of other non-metallic mineral products n.e.c. 0.0 2410 Manufacture of basic iron and steel 3.1 2420 Manufacture of basic precious and other non-ferrous metals 0.1 2511 Manufacture of structural metal products 0.0 2512 Manufacture of tanks, reservoirs and containers of metal 0.1 2593 Manufacture of cutlery, hand tools and general hardware 0.0 2599 Manufacture of other fabricated metal products n.e.c. 0.2 2610 Manufacture of electronic components and boards 0.0 2732 Manufacture of other electronic and electric wires and cables 0.6 2750 Manufacture of domestic appliances 0.2 2825 Manufacture of metal-forming machinery and machine tools 0.0 2920 Manufacture of bodies (coachwork) for motor vehicles; manufacture of trailers and semi-trailers 0.5 2930 Manufacture of parts and accessories for motor vehicles 0.1 3100 Manufacture of furniture 2.3 3211 Manufacture of jewellery and related articles 0.2 3290 Other manufacturing n.e.c. 0.4 3319 Repair of other equipment 0.1 3510 Electric power generation, transmission and distribution 16.9 3600 Water collection, treatment and supply 1.2 Total 100.0
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Appendix 2: PPI weights of ISIC Level Three ISIC Level 3 Industrial activity description Weight (%) 072 Mining of non-ferrous metal ores 15.7 081 Quarrying of stone, sand and clay 0.2 089 Mining and quarrying n.e.c. 3.1 101 Processing and preserving of meat 0.4 102 Processing and preserving of fish, crustaceans and molluscs 1.7 103 Processing and preserving of fruit and vegetables 1.9 104 Manufacture of vegetable and animal oils and fats 4.3 105 Manufacture of dairy products 0.2 106 Manufacture of grain mill products, starches and starch products 5.1 107 Manufacture of other food products 5.6 108 Manufacture of prepared animal feeds 0.3 110 Manufacture of beverages 12.0 120 Manufacture of tobacco products 3.3 131 Spinning, weaving and finishing of textiles 1.3 139 Manufacture of other textiles 1.8 141 Manufacture of wearing apparel, except fur apparel 0.1 142 Manufacture of articles of fur 0.0 151 Tanning and dressing of leather; manufacture of luggage, handbags, saddlery and harness; dressing and dyeing of fur 0.2 152 Manufacture of footwear 0.1 161 Sawmilling and planing of wood 0.9 162 Manufacture of products of wood, cork, straw and plaiting materials 0.4 170 Manufacture of paper and paper products 2.2 181 Printing and service activities related to printing 1.2 182 Reproduction of recorded media 0.0 192 Manufacture of refined petroleum products 0.3