National Statistical Institute

"Consumer Prices, Housing prices and PPP" Department

Albena Dancheva

Head of department

2, P. Volov Str., 1038 Sofia, Bulgaria

[email protected]

+359 2 9857 767

The aim of the statistical survey of consumer prices is is to obtain country representative data for the price change of defined goods and services, consumed by households. The survey provides the necessary information for the compilation of the following indicators: Consumer Price Index (CPI), Harmonized Index of Consumer Prices (HICP) and Price Index of Small Basket (PISB).

CPI is the official measure of inflation in the Republic of Bulgaria. It measures the total relative price change of goods and services used by resident households for private (non-production) consumption.

HICP is comparable measure of inflation across EU Member states. It is one of the criterions of price stability and for readiness of Bulgaria to join the Euro-zone. HICP is calculated according to a harmonized approach and a single set of definitions for EU member states. HICP, just as CPI, measures the total relative change of the prices of goods and services but they differ in the coverage of households. HICP covers the consumption of all households on the territory of the country, including institutional and foreign ones, while CPI - consumption of Bulgarian households.

PISB measures the relative average price changes of defined socially useful and vital for the living goods and services that are essential for the biological and social existence of a separate person and household with comparatively low income.

Indices of consumer basket measure only the change of prices and therefore they are defined as "pure price change" indices. They do not measure the cost of living and are not cost of living indices.

CPI and HICP are used as macroeconomic indicators, measure of inflation, unlike PISB which give the public additional information on inflation processes in the country.

ECOICOP classification – the European Classification of Individual Consumption According to Purpose, according Regulation (EU) 2016/792 of 11 May 2016[1] of the European Parliament and of the Council.

Statistical survey of consumer prices covers sector "Households" and more precisely the goods and services consumed by households.

The following data are published:

CPI:

1) Monthly:

• Indices (CPI 1995=100);
• Monthly inflation rates (previous month=100);
• Inflation rates since the beginning of the year (December of the previous year=100);
• Annual inflation rates (corresponding month of the previous year=100);
• Annual average inflation rates (previous 12 months=100).

2) Annual:

• Annual inflation rates;
• Annual average inflation rates.

HICP:

1) Monthly:

• Indices (HICP 2015=100);
• Monthly inflation rates (previous month=100);
• Inflation rates since the beginning of the year (December of the previous year=100);
• Annual inflation rates (corresponding month of the previous year=100);
• Annual average inflation rates (previous 12 months=100).

2) Annual:

• Annual inflation rates;
• Annual average inflation rates.

PISB:

1) Monthly:

· Monthly rates of change (previous month=100);

• Inflation rates since the beginning of the year (December of the previous year=100).

CPI: Each published index or rate of change refers to the 'final monetary consumption expenditure' of Bulgarian (residential) households on the territory of the country.

HICP: Each published index or rate of change refers to the 'final monetary consumption expenditure' of all households on the territory of the country (including institutional and foreign ones).

PISB: Each published index or rate of change refers to the 'final monetary consumption expenditure' of Bulgarian households with the lowest income, on the territory of the country.

Statistical population is the "household final monetary consumption expenditure" within the economic territory of the country.

CPI covers final monetary consumption expenditures of residential households within the economic territory of the country.

CPI excludes:

· expenditures of Bulgarian households abroad;

· expenditures of institutional households;

· expenditures of non-residents (foreign citizens);

· expenditures for consumer goods for business purposes.

HICP covers final monetary consumption expenditures of the following households' categories within the economic territory of the country according to the domestic concept for consumption:

· expenditures of residential (Bulgarian) households, incl.institutional households;

· expenditures of non-residents (foreign citizens);

HICP excludes:

· expenditures of Bulgarian households abroad;

· expenditures for consumer goods for business purposes.

PISB includes consumer expenditures of 20% residential (Bulgarian) households within the economic territory of the country with the lowest income.

Territory of the Republic of Bulgaria.

CPI:

· Total CPI - since May 1990;

· CPI by commodity groups - since January 1995;

HICP: since January 1997;

PISB: since January 2001.

CPI: 1995=100;

HICP: 2015=100;

PISB: 2000=100.

Following units are used:

· Index;

· Percentage change on the previous month (monthly rate);

· Percentage change on the December of the previous year (accumulation of inflation rate since the beginning of the year);

· Percentage change on the same month of the previous year (annual inflation rate);

· Percentage change of 12-th months of current year compared to corresponding period of the previous year (annual average inflation rate).

month

· Council Regulation (EC) 2494/95 of 23 October 1995 concerning harmonized indices of consumer prices (repealed);

· Commission Regulation (EC) 1749/96 of 9 September 1996 on initial implementing measures for Council Regulation (EC) 2494/95 of 23 October 1995 concerning harmonized indices of consumer prices;

· Commission Regulation (EC) 2214/96 of 20 November 1996 concerning harmonized indices of consumer prices: transmission and dissemination of sub-indices of the HICP (Text with EEA relevance);

· Commission Regulation (EC) 2454/97 of 10 December 1997 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards minimum standards for the quality of HICP weightings (Text with EEA relevance);

· Council Regulation (EC) 1687/98 of 20 July 1998 amending Commission Regulation (EC) No 1749/96 concerning the coverage of goods and services of the harmonised index of consumer prices;

· Council Regulation (EC) 1688/98 of 20 July 1998 amending Commission Regulation (EC) No 1749/96 concerning the geographic and population coverage of the harmonised index of consumer prices;

· Commission Regulation (EC) 2646/98 of 9 Desember 1998 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards minimum standards for the treatment of tariffs in the Harmonized Index of Consumer Prices (Text with EEA relevance);

· Commission Regulation (EC) 1617/1999 of 23 July 1999 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 - as regards minimum standards for the treatment of insurance in the Harmonized Index of Consumer Prices and modifying Commission Regulation (EC) No 2214/96 (Text with EEA relevance);

· Commission Regulation (EC) 1749/1999 of 23 July 1999 amending Regulation (EC) No 2214/96, concerning the sub-indices of the Harmonized Indices of Consumer Prices (Text with EEA relevance);

· Council Regulation (EC) 2166/1999 of 8 October 1999 laying down detailed rules for the implementation of Regulation (EC) No 2494/95 as regards minimum standards for the treatment of products in the health, education and social protection sectors in the Harmonized Index of Consumer Prices (Text with EEA relevance);

· Commission Regulation (EC) 2601/2000 of 17 November 2000 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards the timing of entering purchaser prices into the Harmonised Index of Consumer Prices (Text with EEA relevance);

· Commission Regulation (EC) 2602/2000 of 17 November 2000 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards minimum standards for the treatment of price reductions in the Harmonised Index of Consumer Prices (Text with EEA relevance);

· Commission Regulation (EC) 1920/2001 of 28 September 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards minimum standards for the treatment of service charges proportional to transaction values in the harmonized index of consumer prices and amending Commission (EC) No 2214/96 (Text with EEA relevance);

· Commission Regulation (EC) 1921/2001 of 28 September 2001 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards minimum standards for revisions of the harmonized index of consumer prices and amending Regulation (EC) No 2602/2000 (Text with EEA relevance);

· Commission Regulation (EC) 1708/2005 of 19 October 2005 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards the common index reference period for the harmonised index of consumer prices, and amending Regulation (EC) No 2214/96 (Text with EEA relevance);

· Council Regulation (EC) 701/2006 of 25 April 2006 laying down detailed rules for the implementation of Regulation (EC) No 2494/95 as regards the temporal coverage of price collection in the harmonised index of consumer prices (Text with EEA relevance);

· Commission Regulation (EC) 1334/2007 of 14 November 2007 amending Regulation (EC) No 1749/96 on initial implementing measures for Council Regulation (EC) No 2494/95 concerning harmonised indices of consumer prices (Text with EEA relevance);

· Commission Regulation (EC) 330/2009 of 22 April 2009 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards minimum standards for the treatment of seasonal products in the Harmonised Indices of Consumer Prices (HICP) (Text with EEA relevance);

· Commission Regulation (EU) No 1114/2010 of 1 December 2010 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards minimum standards for the quality of HICP weightings and repealing Commission Regulation (EC) No 2454/97 (Text with EEA relevance).

 · Commission Regulation (EU) No 119/2013 of 11 February 2013 amending Regulation (EC) No 2214/96 concerning harmonised indices of consumer prices (HICP): transmission and dissemination of sub-indices of the HICP, as regards establishing harmonised indices of consumer prices at constant tax rates.

 · Commission Regulation (EU) 2015/2010 of 11 November 2015 amending Regulation (EC) No 1708/2005 laying down detailed rules for the implementation of Council Regulation (EC) No 2494/95 as regards the common index reference period for the harmonised index of consumer prices.

· Regulation (EU) 2016/792 of the European Parliament and of the Council of 11 May 2016 on harmonised indices of consumer prices and the house price index, and repealing Council Regulation (EC) No 2494/95 (ОJ L 135, 24.05.2016 ,p.11).

Not applicable.

· Law on Statistics;

· Regulation (EC) No 223/2009 on European statistics (recital 24 and Article 20(4)) of 11 March 2009 (OJ L 87, p. 164), stipulates the need to establish common principles and guidelines ensuring the confidentiality of data used for the production of European statistics and the access to those confidential data with due account for technical developments and the requirements of users in a democratic society.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:087:0164:0173:bg:PDF

Individual data are not published in accordance with article 25 of the Law on Statistics. The publishing of individual data can be performed only in accordance with article 26 of the same law.

Information on the indices of consumer prices and the inflation is published monthly - between 13th and 16th of the month following the reference month. Date of publication of the statistical information is specified at the Release Calendar presenting the results of the statistical surveys carried out by the National Statistical Institute.

The calendar is available on the NSI website: http://www.nsi.bg/en/node/480

Statistics on consumer prices indices are published on the NSI website in section Inflation and Consumer Price Indices in accordance with the Law on Statistics and the European Statistics Code of Practice respecting the professional independence and aimed at objectivity, transparency and equal treatment of all consumers.

Monthly

Statistics on consumer price indices are published in regular press-releases according to pre-defined timetable. Data are released monthly and cover: indices calculated on different base periods, monthly inflation rates, inflation rates since the beginning of the year, annual inflation rates and annual average inflation rates.

• Statistical Yearbook;
• Statistical Reference Book;
• Electronic publication "Key indicators for Bulgaria";

· Brochure "Consumer Price Indices and Inflation";

· Brochure "Bulgaria".

Statistics on consumer price indices are available to all users of the NSI website under the heading Inflation and Consumer Price Indices: http://www.nsi.bg/en/node/6010

Not applicable.

Not applicable.

· Internet site of NSI:

http://www.nsi.bg/sites/default/files/files/metadata/CPI_methodology_2019-ENG.pdf

http://www.nsi.bg/sites/default/files/files/metadata/CPIBasket_2019-ENG.pdf

http://www.nsi.bg/sites/default/files/files/metadata/HICP_methodology_2019-ENG.pdf

http://www.nsi.bg/sites/default/files/files/metadata/MK_methodology_2019-ENG.pdf

http://www.nsi.bg/sites/default/files/files/metadata/MK_SmallBasket_2019-ENG.pdf

 · EU reglaments:

http://ec.europa.eu/eurostat/web/hicp/legislation

Eurostat's Compliance Monitoring Report for 2007 and for 2013:

http://ec.europa.eu/eurostat/web/hicp/methodology/compliance-monitoring

In the context of compliance monitoring and quality assurance, Eurostat reviewed the HICP for Bulgaria in autumn 2007. The statistical practices used to compile the HICP for Bulgaria have been reviewed against HICP methodology and other guidelines and good practices in the field of consumer price indices. The recommendations have been followed by NSI and have been implemented in practice in order to assure accuracy, reliability and comparability of HICP.

In 2013 NSI elaborated an inventory of HICP sources and methods which is one of the main elements of the new strategy for monitoring the compliance of HICP produced by countries with the acquisitions of HICP reglaments. The inventory provides detailed description of the current practice in NSI and is the base for assessment to what extend the national practice is relevant to the legal requirements as well as the base for Compliance monitoring conducted by Eurostat.

The representativity of the HICP, in terms of accuracy and reliability, is generally adequate. HICP is considered to be sufficiently accurate for all practical purposes it is put into.

See Eurostat's Compliance Monitoring Report of 2007 and of 2013:

http://ec.europa.eu/eurostat/web/hicp/methodology/compliance-monitoring

Data on the consumer price indices are used for analysis, prognoses and management purposes of the government institutions, agencies and other organizations.

The main national users are: National Assembly of The Republic of Bulgaria, The Government, BNB, Ministries, National and State Agencies; information media;

Major international user are : Eurostat, ECB, IMF, UN ECE.

NSI conducts a regular statistical survey "Users' satisfaction" which covers all statistical domains. It aims to assess user satisfaction in NSI data provision and to outline the recommendations for future development of statistical system according to the needs of the users.

No missing data. Bulgaria produces and delivers the full set of data for indices and weights in the consumer price statistics.

Statistical data are with good accuracy. The accuracy of CPI, HICP and PISB is assured by strictly following Eurostat's methodological recommendations and regulations. The type of survey and the price collection methods ensure sufficient coverage and timeliness.

Construction and producing of CPI, HICP and PISB are based on a sample of consumer prices and household expenditures, which are not the complete universe of all prices/expenditures.

The common use of purposive sample makes it difficult to assess the sample error. Therefore and due to the complexity of price index structures NSI does not produce estimates on sampling errors.

Nevertheless the NSI aims to avoid possible bias due to sample misrepresentation by using a sample of consumer prices that is as large as possible by the given resource constraints.

NSI tries to optimise the allocation of resources by indicating the number of prices that should be observed in each geographic area and each item category, in order to minimize the variance of the all items index.

Non-sampling errors are not quantified for the indices of consumer prices. The NSI tries to reduce non-sampling errors through continuous methodological improvements and survey process improvements, which can help us to avoid coding and typing errors.

Data are published on the 1^st working day after the 11^th calendar day of the month following the reference month, i.e. 13-16 days after the month in question.

Data are always delivered and published on the pre-announced release dates.

Indices of consumer prices are compiled on national level. In construction of the indices the national stratification is used and no regional indices are produced.

HICP is based on the harmonised definitions and classification stipulated in a series of legal acts it should be considered comparable to the HICPs of other EU countries.

Indices of consumer prices are fully comparable over time. However, there have been several improvements in methodology, since CPI, HICP and PICB were introduced. These changes may have introduced breaks in time series. In such cases, back calculations under the new standards were performed when appropriate basic data was available and historical series were revised.

Since 1999 NSI applies improved methodology for CPI construction in accordance with the requirements of Eurostat and IMF. In order to provide comparable series of CPI, monthly indices were revised for the period January 1995 - December 2000.

Implementations of the regulations on the treatment of seasonal items in HICP (since January 2011) and HICP weights (since January 2012) are the latest methodological improvements that impact on the HICP series. Parallel computations by the new and by the old methods were carried out and the implementation of two regulations was assessed, in order to assure comparable series of indices.

In compliance with Regulation (EC) No 2015/2010 since January 2016 the base year for HICP has been changed and the all indices have been calculated and published at 2015 as a base year.

For more information:

https://ec.europa.eu/eurostat/web/hicp/methodology

CPI as well as HICP are measures of inflation, i.e. assesses the change of price level of goods and services. Both indices, in most of the cases are based on the same data sources, both are estimated from the same basket of goods and services, using the same statistical techniques and methods, but differ in their purpose as a measure of inflation therefore they use different concepts.

CPI is an official measure of inflation in Republic of Bulgaria. It gives information about the price changes in the national economy to the Government, business, citizens and the public as a whole. CPI is used for economic analysis, as a financial instrument, and also as a tool for indexation of different income, claims, liabilities, contract payments, etc.

HICP is used mainly for the monetary policy of EU. HICP is one of the criteria for assessment weather a member state is ready to join the Eurozone. HICP is used as a comparable measure of inflation in EU states and for evaluation of price stability in member states. This application of HICP requires harmonized conceptual framework and comparable results. In addition, HICP is increasingly used in economic analyses and indexation.

Estimated HICP differs from the national CPI. The main reason is the treatment of non-residents (foreign citizens) consumption on the territory of the country. This consumption is covered in HICP calculation but is out of the scope of the national CPI.

The same statistical techniques and methods used for calculation of CPI and HICP are used for the computation of PISB, but its purpose is to give additional information about the inflation processes in the country, not to measure the inflation. PISB measure the price change of certain socially useful and vital for the living goods and services, consumed by households with comparatively low income.

Price indices are internal coherent. Higher level aggregations are derived from detailed indices according to well-defined procedures.

CPI, HICP and PISB series, including back data, are revisable under the terms set in Commission Regulation (EC) No 1921/2001 of 28 September 2001. The published data may be revised for errors, new or improved information, and changes in the system of harmonised rules.

In general, monthly indices are not subject to revision. They are final when first released. The only exception is the January indicators, which were revised in March with final weights for the current year.

The main data source for the CPI, HICP and PISB is the statistical survey of consumer prices. It is a sample survey with monthly periodicity.

Indices of consumer prices are based on four main samples:

· Consumer basket - a sample of goods and services, consumed by households, the price of which are registered;

· A sample of settlements, where the prices of goods and services from the consumer basket are observed;

· Observation points - a sample of shops, restaurants, cafes and others within the settlements;

· Registered prices - a sample of prices, comprising the prices in the observation points of the goods and services from the consumer basket.

Sample size for the CPI and HICP (reference year 2019):

No of price observations per month: 39 021

01 Food and non-alcoholic beverages 13 829

02 Alcoholic beverages, tobacco 1 512

03 Clothing and footwear 6 524

04 Housing, water, electricity, gas and other fuels 1 253

05 Furnishings, household equipment and routine household maintenance 3 954

06 Health 2 860

07 Transport 1 583

08 Communication 141

09 Recreation and culture 1 729

10 Education 94

11 Restaurants and hotels 2 935

12 Miscellaneous goods and services 2 607

Number of representative goods and services for CPI and HICP:

All items: 741

01 Food and non-alcoholic beverages 161

02 Alcoholic beverages, tobacco 25

03 Clothing and footwear 120

04 Housing, water, electricity, gas and other fuels 31

05 Furnishings, household equipment and routine household maintenance 70

06 Health 55

07 Transport 52

08 Communication 50

09 Recreation and culture 61

10 Education 6

11 Restaurants and hotels 56

12 Miscellaneous goods and services 54

Number of observation points: above 6 500.

PISB basket (small basket) in 2019 comprises 124 goods and services, distributed in three main commodity groups:

· Food products - 58;

· Non-food products - 47;

· Services - 19.

Main data sources, used in weights construction are national accounts (for HICP) and the Households budget survey (for CPI and PISB).

Prices of most goods and services are collected each month between the 1st and 28th of the month (prices are not collected during weekends and public holidays). The exceptions to this rule are the prices of some specific services which are registered each week (for example, Package holidays), or at the beginning or at the end of the month (for example, Kindergarten), or twice in a year (for example, University fees).

Most of the prices are observed regionally by price collectors - qualified specialists employed by the regional statistical offices (RSOs): locally collected prices account for 77% of the total HICP weight. The prices of electricity, mobile phones, personal computers, books, newspapers, pre- recorded recording media, electronic games, insurance, packaged holidays, hotels in holiday centres, camping sites, youth hostels and similar accommodation services, banking services, administrative fees, legal services and accountancy and some of the health, transport and telecommunication services are collected centrally.

Outlet selection:

The prices are collected at selected observation points (outlets) - a sample of stores, shops, restaurants, cafes, etc. in the sample of localities. The sampled outlets are chosen using non-probability sampling methods: 'purposive' or 'judgmental' sampling. They are selected at regional level by price collectors in the regional statistical offices.

The number and structure of the observation points ensure that the optimum number of prices is collected, enough to represent national price for any group of goods and services observed. The number of observation points is determined in proportion to the population in the selected district centres and to the volume of retail sales in the relevant outlets. The sample includes outlets which:

• have a large volume of retail sales;
• supply a variety of goods representative of the relevant elementary aggregate groups.

The main types of trade are covered, including hypermarkets, supermarkets, general and specialised stores and market stalls. Mail order and Internet shopping are not included in the index (until now they have not been significant). Prices for PCs, mobile phones, mobile and fixed phone services are collected from the Internet sites of the relevant suppliers.

Methods of product selection and specification:

The prices of a specially selected representative sample of goods and services ('consumer basket') are collected. The products are selected and specified jointly by staff in central office and by price collectors in the regional statistical offices.

The procedures for specifying the representative goods and services can be described as follows:

• definition of an initial product sampling framework using HBS results;
• use of alternative data sources to define the exact characteristics of the products sampled (administrative data, private databases, etc.), in addition to HBS data, where possible;
• use of price collectors' field experience if the data from the upper two sources are not enough to define and specify the products sampled;
• extraction of the sample of goods and services representative by using purposive sampling methods.

The specifications for individual goods/services are more or less detailed, indicating size, unit, materials, model, brand characteristics, etc. Two kinds of specifications are used: detailed and general. How tight or loose the specifications will be depends on the nature of the product. If a product has many characteristics which could affect its price, the specification is more detailed.

The specific variety of each good/service (reference product-offer) whose price will be collected in the outlet sampled is selected by price collectors. They are instructed to pick the 'typical' product variety:

• which is the top selling variety in the outlet sampled; and
• which corresponds most closely to the predetermined characteristics of the product, included in the sample of price observation.

At the end of each year, during the annual revision of the CPI/HICP, NSI officials send to the RSOs experts series of instructions for procedures of price specifications which price collectors must apply. The problems on the sellection of the products and products' specifications are discussed at regular seminars/workshops with price collectors.

Data quality checks and validation work is distributed between central office and regional statistical offices, but most of the data editing is carried out at the "Statistics of consumer prices and PPP" division in the central office of NSI.

The data validation process at regional offices can be divided into two stages. The first one takes place during the entering of the collected prices into the computer system, the second stage includes checking and validating by specialists in regional statistical offices and if necessary, prices are cross-checked in outlets.

The validation of the data in the central office is done after the first index calculation. Data quality checks fall into the following types of validation: 'relevant' index change validation (extreme and unusual price levels/changes); missing prices validation; outlets replacement validation; product specification change validation; fresh products price change validation; etc.

There is no automatic rejection of observed prices in our validation process. Each case (problematic price) is considered individually and all necessary modifications are done only on the basis of relevant information.

Weights:

CPI: Data on the final monetary consumption expenditures of the households are used as statistical weights for the CPI calculation. The main source of information concerning the expenditures is the household budget survey in the country. CPI in year t is calculated on the basis of the expenditures structure of year t - 1.

Additional sources are used to work out in detail weights for electricity, heat energy, telecommunications, tobacco, clothing and footwear, medicines, fuels, automobiles, actual rentals for housing, insurances, accommodation services, books, newspapers etc. At the lowest level of aggregation 374 elementary aggregates are defined.

Weights are expressed as a part of the total expenditures of all goods and services within the scope of the index. They are updated annually based on Households budget survey and additional data.

HICP: Weights for HICP are constructed according to the requirements of Commission Regulation (EU) No 1114/2010[1] and Commission Regulation (EU) No 1688/98[2]. HICP weights reflect the structure of the final monetary consumption expenditures of the households (HFMCE) - domestic concept.

National accounts are the main source of data for construction of the HICP weights at the highest levels of aggregation. HICP in year t is calculated with the weights of year t-2.

In constructing of the weights for HICP, data from NA are adapted as follows:

From the HFMCE - domestic concept, as resulting from national accounts, are excluded:

· Own final consumption (to the extent that it forms part of HFCE and does not involve monetary transactions) - mainly imputed rentals COICOP 04.2.0

· Expenditure on the following COICOP classes:

a) Narcotics (COICOP 02.3.0)

b) Games of chance (COICOP 09.4.3)

c) Prostitution (COICOP 12.2.0)

d) Service charge for life insurance (12.5.1)

e) Administrative charges of private pension funds and the like (COICOP 12.6.2)

and the result is:

Households final monetary consumption expenditure, HFMCE - domestic concept.

Data from household budget survey (HBS) is used for construction of the weights at the lower levels of aggregation, where the information from NA is not available.

Additional sources are used to work out in detail weights for electricity, heat energy, telecommunications, tobacco, clothing and footwear, medicines, fuels, automobiles, actual rentals for housing, insurances, accommodation services, books, newspapers etc. At the lowest level of aggregation 374 elementary aggregates are defined.

Weights are expressed as a part of the total expenditures of all goods and services within the scope of the index.

NA data for 2017 in combination with HBS data for 2018 are used as weights for calculation of the HICP in 2019. Weights are price-updated to December 2018 for ensuring of the common base period of the index.

Weights are reviewed and updated annually based on NA and HBS results and on other data sources.

PISB: Data for final monetary consumption expenditures of the 20% of the households with the lowest income are used as statistical weights for the PISB calculations. The main source of weights information is the Households Budget Survey in the country. This index in year t is calculated with the weights of year t-1.

Additional sources are used to work out in detail weights for some commodity groups.

Weights are expressed as a part of the total expenditures of all goods and services within the scope of the index. They are updated annually based on Households budget survey and additional data.

Computation of the lowest-level indices: For compilation of price indices for elementary aggregates the unweighted geometric mean of prices is used.

Computation of the high hierarchical level indices and of the total index: The Laspeyres formula is used in the compilation of the high-level indices and of the total index - weighted average of the indices and the corresponding weights.

Treatment of the missing observations and replacements

In case of temporally missing price the imputation is done in the 1^st and in the 2^nd month. For estimation of the missing price the method of matching samples is used and the short-term approach is applied - the imputation is done using the short-term price relative. If the price is still missing in the 3^rd month, the price collector is obliged to select a replacement.

When replacing an old product by a new replacement product, price collectors are instructed to:

· Choose another product with the most similar quality and the one that accounts for the substantial amount of sales value in the outlet; and,

· Ask for the price of the new replacement product in the previous month.

When replacing an outlet (due to closure of outlet), price collectors are told to choose a new one, which has to be:

· as close as possible to the old outlet;

· of the same type;

· as similar as possible to the old outlet in term of their sales values.

Introduction of newly significant goods and services:

The procedures for identification of newly significant goods and services is based on:

· Analyses of HBS data on the structure of household expenditures;

· Price collectors information;

· Research and consultations with suppliers;

· Nomenclature of goods and services, included in the PPP survey;

· Eurostat list of the newly significant goods and services introduced to the member states.

Newly significant good and services are introduced at the end of each year (in December) during the annual revisions of consumer basket.

Treatment of price reductions

Seasonal sales, other sales prices and reduced prices (e.g. special offers, discounts, etc.) are included in the index when they are available to all potential consumers with no special conditions attached.

Treatment of seasonal products: The seasonal products are treated according to the requirements of the Commission Regulation (EC) N 330/2009.

The fixed-weight approach is used for determining of the weights for seasonal items i.e. during the whole year indices of seasonal products are calculated with fixed weights.

The prices of the missing fruits and vegetables during the out-of-season are estimated using the method of 'all-seasonal estimation':

• in the first month of out-of season period, the estimated price is equal to the average price of the previous in-season period;
• from the second month of out-of season period, the estimated price is equal to the price of the previous month, adjusted by the price change of all available products.

The prices of the missing clothing and footwear during the out-of-season are estimated using the method of 'counter-seasonal estimation':

• in the first month of out-of season period, the estimated price is equal to the average price of the previous in-season period;
• from the second month of out-of season period, the estimated price is equal to the price of the previous month, adjusted by the price change of all seasonal products that are in-season.

Seasonal adjustments are not applied.

Treatment of the quality changes of the observed products

When the HICP is calculated, it is important to be priced the products with unchangeable quality, because the change in prices should reflect only 'pure' price changes not changes due to change in the quality of the observed products.

The following quality adjustment methods dealing with quality change of products are applied:

· Annual overlap. For many of the products new samples are drawn each year during the annual revision of consumer basket. December is used as linking month and then the dual price collection is done - the prices are collected both for the old and for the new sample. Quality differences between these two samples are then eliminated by overlap method called 'annual overlap'.

· Direct comparison. Price collectors are instructed to measure the price for the same variety throughout the year and if the variety disappears permanently from the market, they should choose another one with the most similar quality. In these cases, direct comparison method is applied, because of the minor difference in quality between the old and the new variety.

· Implicit quality adjustment methods. In some particular cases, the second approach is not applicable, due to the fact that quality difference between old and new product is 'significant', and implicit quality adjustment methods are applied. Overlap is used when the prices of both products are available in the same time period; bridged overlap (class-mean imputation) - when prices are not available; option cost.

Quality adjustment procedures are done centrally by the staff in central office. At regional level, price collectors do not make any quality adjustments; they are only instructed to report to central office for the all cases of considerable quality changes of the replacement products.