Obfuscating Inflation

The past few days I have been pondering whether or not the changing in net weight of a product is factored in when calculating the consumer price index (CPI). This relates back to a rant I had earlier in the year about the subtle 1g decrease in each packet of chips within a box of chips. Across 15 packets, there was 15g decrease or 5% saving they are made per box.

So I asked a friend who works at the Australian Bureau of Statistics (ABS) whether or not they factored this in. She didn't know but she me a link to the CPI document. It's quite an enthralling read.

The important bit is this paragraph:

Some changes are relatively easy to deal with while others prove more difficult if not intractable. A marginal change in say the weight of the can of tomato soup from 440gms to 400gms can be handled relatively easily by computing the quality adjusted price by reference to the price per gram. If the list or observed price is unchanged, the quality adjusted price will record an increase of 440/400 or 10%. Quality changes due to either a change in brand or the ingredients pose more difficult measurement problems for which we generally have no ready solution and are forced to treat the change as if it were a change in sample. Some item categories are particularly prone to a high rate of turnover in the specific brands or varieties available, and we are constantly adjusting our samples, again ensuring sample changes are introduced in such a way that the index reflects only pure price change and not differences in the cost of the old and new samples - note that this can be considered as a guiding principle in calculating the CPI.

So, yes they do factor it in, and consider many more things than I had considered. Jolly good!


Some enthralling reads:

• CPI Explanatory Notes
• CPI Summary for Australia, Mach, 2008

Note: replace enthralling with gruelling.