Monthly Consumer Price Index Indicator methodology

Latest release
Reference period
December 2022

Introduction

The monthly Consumer Price Index (CPI) indicator was developed to provide inflation data at a higher frequency for use by governments, economists and the wider community. The quarterly CPI remains the principal measure of household inflation.

The monthly CPI indicator is derived using available data from the quarterly CPI. The data and methods used in the monthly CPI indicator are consistent with what is used in the quarterly CPI Consumer Price Index, Australia.

Details on the development of the monthly CPI indicator can be found in the following information paper: Introducing a monthly CPI indicator for Australia

A list of frequently asked questions is available here: Monthly CPI indicator FAQs

Brief description of the CPI

The CPI is a general measure of prices for goods and services purchased by Australian households. Changes in the CPI provide a measure of household inflation. 

The CPI measures the change in the cost of a 'basket' of goods and services which account for a high proportion of expenditure by the CPI population group (that is, metropolitan households). This basket covers a wide range of goods and services, arranged in the following eleven groups:

  • Food and non-alcoholic beverages
  • Alcohol and tobacco
  • Clothing and footwear
  • Housing
  • Furnishings, household equipment and services
  • Health
  • Transport
  • Communication
  • Recreation and culture
  • Education
  • Insurance and financial services

Explanatory notes

The monthly CPI indicator

The monthly CPI indicator has been developed using existing data sources used to produce the quarterly CPI to provide a monthly CPI indicator of inflation.

The ABS collects a large volume of data on the prices faced by consumers. These prices are collected at a range of frequencies including weekly, monthly, quarterly and annually.

Conceptually, the monthly CPI indicator will include all the items of the quarterly CPI basket, however, not all items in the basket will be updated with new prices each month. As a result, the monthly CPI indicator has some deficiencies relative to the quarterly CPI. In particular, the frequency of price collection and the methods used to compile the two indexes will lead to differences between the monthly CPI indicator and the quarterly CPI.

Monthly price data is available for 43% of the CPI basket. When combined with quarterly and annual price collections, the new monthly CPI indicator represents up-to-date prices for between 62 and 73 per cent of the weight of the CPI basket, depending on the month in the quarterly cycle (see section on Imputation).

The monthly CPI indicator data is published at the national level, derived as a weighted average of the eight capital cities.

Further information about the CPI is contained in Consumer Price Index: Concepts, Sources and Methods.

Price collection

The same price data is used in the monthly CPI indicator as the quarterly CPI Consumer Price Index, Australia.

The frequency of price collection by item varies as necessary to obtain reliable price measures. Prices of some items are volatile (i.e. their prices may change multiple times each month) and for these items, frequent price observations are necessary to obtain a reliable measure of the average price change. Each month, prices are collected at regular intervals for items such as alcohol, clothing, dwelling construction, rents, petrol and holiday travel and accommodation. There are a few items where prices typically change at infrequent intervals, for example education fees where prices are set once a year at the start of the school year. In these cases, the frequency of price collection is modified accordingly. 

For some items in the CPI basket, prices are collected once every third month. This is a design feature of the quarterly CPI where price change is measured on a quarterly basis for around half the weight of the CPI basket. To facilitate an even spread of price collection workload, the number of items for which prices are collected is distributed roughly equally across each month of the quarter. In all cases, individual items are priced in the same month of each quarter. For example, items for which prices are collected in the first month of the September quarter, July, are also priced in the first month of subsequent quarters, namely October, January and April (see link for list of when items are collected Monthly CPI goods and services coverage).

The Australian Bureau of Statistics (ABS) uses a variety of sources to collect CPI prices, such as online and telephone collection and administrative data, including scanner data. For some items the ABS uses automated website data collection, referred to as 'web scraping'. Further information is discussed in Web Scraping in the CPI. In the case of transactions ‘scanner’ data, revenue and quantity data are collected on a weekly basis. For further details on the ABS’s use of scanner data see An Implementation Plan to Maximise the Use of Transactions Data in the CPI.

Imputation

The monthly CPI indicator combines the monthly collected data and data collected once every three months (quarterly). This approach enables the production of a monthly All groups CPI series, rather than an alternative approach of a partial monthly CPI series based only on the items where monthly data is available.

For those items measured quarterly, imputation is used in the months the quarterly data is not collected. The method used is known as ‘carry forward’ imputation, which imputes a zero movement in the months where price data is not available. This assumes no price change in the months where prices are not collected for the relevant items. These items are then combined with the items where updated prices are available and aggregated to produce a monthly CPI indicator which represents the whole CPI basket.

The following table shows the frequency with which data is collected by the proportion of the quarterly CPI basket that these represent. Including the data collected once per year:

  • January, April, July and October months will include up-to-date price information for 62 per cent of the weight of the quarterly CPI.
  • February, May, August and November months will include up-to-date price information for 73 per cent of the weight of the quarterly CPI.
  • March, June, September and December months will include up-to-date price information for 71 per cent of the weight of the quarterly CPI.

 

Timing of data collection by weight in CPI basket

CPI for month of

Data updated monthly (%)

Data updated once per quarter (%)

Data updated annually (%)

Prices not updated (carried forward) (%)

Total (%)

January, April, July and October

43

9

10

38

100

February, May, August and November

43

20

10

27

100

March, June, September and December

43

18

10

29

100

Revisions

While the quarterly CPI is not revised, the monthly CPI indicator may be revised, particularly while it is being further developed. Some examples of where revisions may occur include:

  • More complete data becoming available closer to the release of the quarterly CPI. This will result in revisions to the previous 1-2 months of the monthly CPI indicator.
  • Converting a series from being measured once per quarter to being measured on a monthly basis. Revisions to the previous 12 months will be implemented to preserve the annual movement in the current and subsequent months.

The attached link outlines a range of issues that users should consider in relation to using price indexes in contracts - Inflation and Price Indexes - Use of Price Indexes in Contracts.

As is the case with all price indexes, the index reference period (the period in which the index is set equal to 100.0) will be changed periodically. The index number levels for all periods will be changed by this process and it may also result in differences, due to rounding, between the percentage changes published on the old base and those on the new base. Seasonally adjusted indexes (including the Trimmed mean and Weighted median) for some months will be revised as extra months are included in the series analysed for seasonal influences.

Weighting pattern

Weighting pattern used for the monthly CPI indicator are based on those used for the quarterly Consumer Price Index, Australia.

There are 87 expenditure classes (that is, groupings of like items) in the 17th series CPI and each expenditure class has its own weight, or measure of relative importance. In calculating the index, price changes for the various expenditure classes are combined using these weights.

Changes in the weighting pattern have formerly been made at approximately six yearly intervals to take account of changes in household spending patterns. From the introduction of the 17th series CPI in December quarter 2017, the weights are now updated annually. The Household Expenditure Survey (HES) is used to re-weight the CPI in the years where it is available, currently six-yearly. In inter-HES years, Household Final Consumption Expenditure (HFCE) data from the National Accounts is used as the primary data source for updating the weights.

The current weighting patterns for the CPI are published in Annual weight update of the CPI and Living Cost Indexes. The historical weighting patterns for the CPI are published in Consumer Price Index: Historical Weighting Patterns, 1948 - 2017.

Rounding

Published index numbers are rounded to one decimal place. Percentage change movements are calculated from the rounded index numbers and then rounded to one decimal place.

Calculating CPI movements

Movements in indexes from one period to another can be expressed either as changes in index points or as percentage changes. The following example illustrates the method of calculating changes in index points and percentage changes between any two periods: 

All groups CPI: Weighted average of eight capital cities. Index numbers:

Month on month movement:

July 2022 index = 114.2
Less June 2022 index = 113.5
Change in index points = 0.7
Percentage change = 0.7/113.5 x 100 = 0.6%

Annual (12 month) movement:

July 2022 index = 114.2
Less July 2021 index = 106.7
Change in index points = 7.5
Percentage change = 7.5/106.7 x 100 = 7.0%

Analytical series

Analytical series are presented to assist users to analyse the monthly CPI indicator. Analytical series include:

  • Seasonally adjusted All groups CPI
  • CPI excluding ‘volatile items’: volatile items are Fruit and vegetable and Automotive fuel
  • Trimmed mean 
Underlying inflation measures

Underlying trend series, 'Trimmed mean' and 'Weighted median': These are two analytical measures of trend inflation using standard ABS seasonal adjustment techniques. For more information see the Information Paper: Seasonal Adjustment of Consumer Price Indexes. The Trimmed mean and Weighted median are calculated using the distribution of expenditure classes each month derived as follows:

  • The CPI expenditure classes are ranked from lowest to highest according to the seasonally adjusted percentage change from the previous month.
  • The seasonally adjusted relative weight of each expenditure class is calculated based on its previous month contribution to the All groups monthly CPI indicator.
  • The 'Trimmed mean' is calculated by using a weighted average of percentage change from the previous month (seasonally adjusted) from the middle 70 per cent of the distribution.
  • The 'Weighted median' is calculated using the percentage change from the previous month (seasonally adjusted) expenditure class at the 50th percentile of the distribution. Currently available for the monthly CPI indicator.

Further details can be found here: Underlying Inflation Measures: Explaining the Trimmed Mean and Weighted Median.

Seasonally adjusted indexes

The Monthly CPI Indicator will be seasonally adjusted using the same methods as the quarterly CPI.

Seasonally adjusted estimates are derived by estimating and removing systematic calendar related effects from the original series. In most economic data these calendar related effects are a combination of the classical seasonal influences (for example, the effect of the weather, social traditions or administrative practices such as government charges increasing on 1 July each year) plus other kinds of calendar related variations, such as Easter or the proximity of significant days in the year (for example, Christmas). In the seasonal adjustment process, both seasonal and other calendar related factors evolve over time to reflect changes in activity patterns. The seasonally adjusted estimates reflect the sampling and non-sampling errors to which the original estimates are subject.

The CPI uses a concurrent seasonal adjustment methodology to derive the adjustment factors. This method uses the original time series available at each reference period to estimate seasonal factors for the current and previous months. Concurrent seasonal adjustment is technically superior to the more traditional method of reanalysing seasonal patterns once each year because it uses all available data to fine tune the estimates of the seasonal component each month. With concurrent analysis, the seasonally adjusted series are subject to revision each month as the estimates of the seasonal factors are improved. In most instances, the only significant revisions will be to the combined adjustment factors for the previous month and for the same month in the preceding year as the reference month (for example, if the latest month is June 2022, then the most significant revisions will be to May 2022 and June 2021). The seasonal patterns are also reanalysed on an annual basis or when there are known changes to regular events. This can lead to additional revisions.


The ABS applies seasonal adjustment to the expenditure class components of the CPI which are found to be seasonal, and then aggregates the seasonally adjusted and non-seasonally adjusted components to calculate the All groups CPI, seasonally adjusted, Trimmed mean and Weighted median estimates. For more information about seasonal adjustment of the CPI please refer to Information Paper: Seasonal Adjustment of Consumer Price Indexes.

Related publications

Current publications and other products released by the ABS are listed on the ABS website http://www.abs.gov.au. The ABS also issues a daily Release Advice on the website which details products to be released in the week ahead.

Users may also wish to refer to the following publications and other data products that are available free of charge from the ABS website:

Data available

For inquiries about these and related statistics, contact the Customer Assistance Service via the ABS website Contact Us page. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to us.

Quality declaration

Institutional environment

For information about the institutional environment of the Australian Bureau of Statistics (ABS), including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms for scrutiny of ABS operations, please see ABS Institutional Environment.

Relevance

The Australian Consumer Price Index (CPI) is conceptually designed to provide a general measure of price inflation for all Australian households each quarter. In practice, the index is constrained to only measure the changes in prices faced by private households living in the six state and two territory capital cities.

The Monthly CPI Indicator provides a more timely indication of inflation, using the same data collected for use in the quarterly CPI.

The simplest way of thinking about the CPI is to imagine a basket of goods and services comprising items bought by Australian households. Now imagine the basket is purchased each month or quarter. As prices change from one period to the next, so too will the total price of the basket. The CPI is simply a measure of the changes in the price of this fixed basket as the prices of items in it change.

The total basket is divided into 11 major groups.  Each represents a specific set of commodities: 

  • Food and non-alcoholic beverages 
  • Alcohol and tobacco 
  • Clothing and footwear 
  • Housing 
  • Furnishings, household equipment and services 
  • Health 
  • Transport 
  • Communication 
  • Recreation and culture 
  • Education 
  • Insurance and financial services.

Most advanced countries publish a monthly CPI. Previously, the costs of producing an Australian monthly CPI have been prohibitive. Enhancements to the quarterly CPI through the use of new data sources have reduced data collection costs. This has made it possible to produce a more frequent measure of household inflation.

The CPI is an important economic indicator used in formulating monetary policy and in a wide range of business, economic and social analysis and decision-making.

The quarterly CPI continues to be Australia’s key measure of inflation. The Monthly CPI Indicator has some deficiencies relative to the quarterly CPI, as some of the data collections underpinning it were not designed with monthly reporting of inflation in mind. As well, the Monthly CPI Indicator may be routinely subject to revision, in contrast to the quarterly CPI which is revised only in exceptional circumstances.

The Monthly CPI Indicator will be seasonally adjusted using the same methods as the quarterly CPI. Seasonal adjustment of the Monthly CPI Indicator is used to produce additional analytical series: the 'All groups CPI, seasonally adjusted' series, and the underlying trend series known as the Trimmed mean. The headline figure, however, remains as the original estimate of the 'All groups CPI'.
 

Timeliness

The Monthly CPI Indicator is generally released four weeks after the end of the reference month. The exception is November, which is released in January due to the Christmas / New Year holiday period.

Accuracy

Conceptually, the Monthly CPI Indicator includes all the items of the quarterly CPI basket. However, not all items in the basket are updated with new prices each month. As a result, the Monthly CPI Indicator has some deficiencies relative to the quarterly CPI.

In particular, the frequency of price collection and the methods used to compile the two indexes will lead to differences between the Monthly CPI Indicator and the quarterly CPI.
Regardless, analysis has shown that the Monthly CPI Indicator performs well as an indicator of inflation as measured by the quarterly CPI.

The frequency of price collection is determined by how often prices typically change, and the availability of data. Where price change occurs frequently, such as for food and petrol, weekly and monthly price data is collected for use in the quarterly CPI. Where price change is typically less frequent, such as for restaurant meals and hairdressing services, price data is collected quarterly. For series with annual price changes, prices are collected once a year, such as education fees and property rates.

For those products or services for which prices are not collected in a particular month, prices collected in previous months are ‘carried forward’. Where prices are updated in month 2 or 3 of any given quarter, the new prices data will not be used to revise previous months in the quarter.  For this reason, the average of the index in the three months for the Monthly CPI Indicator will not equal of the index of the quarterly CPI.

Monthly price data is available for half of the CPI basket. When combined with quarterly and annual price collections, the monthly CPI indicator represents up-to-date prices for around two-thirds of the weight of the CPI basket, depending on the month in the quarterly cycle. 

Coherence

The Monthly CPI Indicator was first compiled for September 2022, with index numbers backcast to September 2017.

Although the movements of the Monthly CPI Indicator and the quarterly CPI align closely in most cases, they are not usually identical. This is to be expected, as a result of differences in the way the two series are calculated. Please refer to the discussion under Accuracy, above.

Interpretability

For the Monthly CPI Indicator, we publish a subset of the CPI quarterly outputs. All data is at the national level, derived as a weighted average of the eight capital cities. The monthly publication includes series for:

  • all groups (combined)
  • each of the eleven CPI groups 
  • selected expenditure classes.

In compiling the CPI quarterly, the objective is to measure the change between average price levels during one quarter and average price levels during the next quarter. 

In contrast, the main objective of the Monthly CPI Indicator is to measure the change between average price levels during the reference month and average price levels for the corresponding month in the previous year. Although it is possible to derive month-on-month changes from the Monthly CPI Indicator series, these movements can be volatile. This is due to a combination of seasonal effects and differences in the coverage of prices used to compile each monthly estimate. For these reasons, we recommend using comparisons of the current month to either

  • the same month in the previous year, or 
  • three months prior,

to gain insights from the Monthly CPI Indicator. These comparisons remove differences in coverage between the periods being compared and, in the case of annual movements, reduce the impact of other seasonal factors, making the extent of price change in the monthly CPI indicator easier to identify. 

The Monthly Consumer Price Index Indicator publication’s Methodology Page provides information about the structure, weights, data sources and other technical aspects of the series. Further information is available in:

Accessability

A link to the latest issue of the Monthly Consumer Price Index Indicator can be found on the ABS home page www.abs.gov.au. Detailed information, including time series spreadsheets, can be found in the data download section on the topic page. For links to data and publications relating to the Consumer Price Index and other prices series, please see the Price Indexes & Inflation topics.

For inquiries about these and related statistics, contact the Customer Assistance Service via the ABS website Contact Us page. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to us.
 

Abbreviations

ABSAustralian Bureau of Statistics
CPIConsumer Price Index
HESHousehold Expenditure Survey
HFCEHousehold Final Consumption Expenditure
n.e.c.not elsewhere classified
Back to top of the page