# Publication Release

Latest release
Producer and International Trade Price Indexes: Concepts, Sources and Methods
Reference period
2022

### Core Release Information

The Producer Price Indexes, and International Trade Price Indexes statistics are  published via the ABS website. The website provides the following information free of charge:

the main findings from the statistical releases

• all publication tables in the publications, downloadable in Microsoft Excel format
• a range of additional tables containing all available PPIs and ITPIs downloadable in Microsoft Excel format.

The Producer and International Trade Price Indexes are released on a quarterly basis to coincide with the compilation of Australian National Accounts and the Balance of Payments.

The publication quarters are:

• Three months ending March (January, February and March)
• Three months ending June (April, May and June)
• Three months ending September (July, August and September)
• Three months ending December (October, November and December)

The publication is released no later than 33 days after the end of the reference quarter with the International Trade Price Indexes, Australia is released on a Thursday and Producer Price Indexes, Australia is released on a Friday.

### Interpreting the Release

This section of the publication provides users with detailed information on how they can interpret the published data outputs within the Producer Price Indexes, and International Trade Price Indexes releases.

### Determining Index Numbers and Percentage Change

Movements in indexes from one period to any other period can be expressed either as changes in index points or as percentage changes. The following example illustrates these calculations for an index series between Period 1 (P1) and Period 2 (P2). The same procedure is applicable for any two periods.

Table 4.14 Index points and percentage change
Index numbers
P2101.1
less P194.7
equals change in index points6.4
Percentage change = 6.4 / 94.7 x 1006.8%

For most applications, movements in price indexes are best calculated and presented in terms of percentage change. Percentage change allows comparisons in movements that are independent of the level of the index. For example, a change of 2 index points when the index number is 120 is equivalent to a change of 1.7%, but if the index number were 80 a change of 2 index points would be equivalent to a change of 2.5% - a significantly different rate of price change. Only when evaluating change from the reference period of the index will the points change be numerically identical to the percentage change.

The percentage change between any two periods must be calculated, as in the example above, by direct reference to the index numbers for the two periods. Adding the individual quarterly percentage changes will not result in the correct measure of longer-term percentage change. That is, the percentage change between, for example, the June quarter one year and the June quarter of the following year will not necessarily equal the sum of the four quarterly percentage changes. The error becomes more noticeable the longer the period covered and the greater the rate of change in the index. This can readily be verified by starting with an index of 100 and increasing it by 10% (multiplying by 1.1) each period. After four periods, the index will equal 146.4 delivering an annual percentage change of 46.4%, not the 40% obtained by adding the four quarterly changes of 10%.

Although the Producer and International Trade Price Indexes are compiled and published as a series of quarterly index numbers, their use is not restricted to the measurement of price change between particular quarters. A quarterly index number can be interpreted as representing the weighted average price during the quarter (relative to the reference period), index numbers for periods spanning more than one quarter can be calculated as the simple (arithmetic) average of the relevant quarterly indexes. For example, an index number for the year 1998 would be calculated as the arithmetic average of the index numbers for the March, June, September and December quarters of 2021.

This characteristic of index numbers is particularly useful. It allows for comparison of average prices in one year (calendar or financial) with those in any other year. It also enables prices in, say, the current quarter to be compared with the average prevailing in some prior year.

### Determining Index numbers and points contribution

The quarterly change in a price index represents the weighted average price change of all the product groups included in that index. Publication of index numbers and percentage changes for components of the broad price indexes are useful in their own right. However, these data are often not sufficient to enable important contributors to overall price change to be reliably identified. What is required is some measure that encapsulates both a product group’s price change and its relative importance in the index.

If a broad level index number is thought of as being derived as the weighted average of the indexes for all its component product groups, then the index number for a component multiplied by its weight to the broad level index results in what is called its ‘points contribution’. It follows that the change in a component item’s points contribution from one period to the next provides a direct measure of the contribution to the change in the broad level price index resulting from the change in that component’s price. This relationship only applies if all components have the same reference period and the same link period. Calculation of points contribution is covered in more detail above, whilst reference period and link periods are discussed in the linking and re-referencing section above.

Information on points contribution and points contribution change is of immense value when analysing sources of price change and for answering ‘what if’ type questions. Consider the following data from the Export Price Index publication (see Table 4.15):

Table 4.15 Selected values form ITPI publication, December quarter
Index numbersPercent changePoints contributionPoints change
Sep qtrDec qtr Sep qtrDec qtr
Total exports90.588.3-2.490.588.3-2.2
Mineral fuels91.084.2-7.525.6823.76-1.92

Using only the index numbers themselves, the most that can be said is that between the September and December quarters, the price of mineral fuels exports fell by more than the overall Export Price Index (by 7.5% compared with a rise in total exports of 2.4%). The additional information on points contribution and points change can be used to:

• Calculate the effective weight for mineral fuels in the September and December quarters (given by the points contribution for mineral fuels divided by the total exports index). For September, the weight is calculated as 25.68/90.5 x 100 = 28.38% and for December as 23.76/88.3 x 100 = 26.91%. Although the underlying quantities are held fixed, the effective weight in export revenue terms has fallen due to the prices of mineral fuels increasing by less than the prices of all other products in the Export Price Index basket (on average)
• Calculate the percentage change that would have been observed in the Export Price Index if all prices other than those for mineral fuels had remained unchanged (given by the points change for mineral fuels divided by the total exports index number in the previous period). For December quarter this is calculated as 1.92/90.5 x 100 = 2.12%. In other words, a 7.5% fall in mineral fuels export prices in December quarter would have resulted in a fall in the overall Export Price Index of 2.12%
• Calculate the average percentage change in all other items excluding mineral fuels (given by subtracting the points contribution for mineral fuels from the total exports index in both quarters and then calculating the percentage change between the resulting numbers - which represents the points contribution of the ‘other’ products). For the above example, the numbers for total exports excluding mineral fuels are: September, 90.5 - 25.68 = 64.82; December, 88.3 - 23.76 = 64.54; and the percentage change, (64.54 - 64.82)/ 64.82 x100 = -0.43%. In other words, prices of all exports other than mineral fuels fell by 0.43% on average between the September and December quarters.
• Estimate the effect on the Total Exports of a forecast change in the prices of one of the products (given by applying the forecast percentage change to the products points contribution and expressing the result as a percentage of the total exports index number). For example, if prices of mineral fuels were forecast to rise by 25% in March quarter 2022, then the points change for mineral fuels would be 23.76 x 0.25 = 5.94, which would deliver a rise in the total exports index of 5.94/88.3 x 100 = 6.7%. In other words, a 25% rise in mineral fuels prices in March quarter 2021 would have the effect of increasing the EPI by 6.7%. Another way commonly used to express this impact is “a 25% rise in the price of mineral fuels would contribute 6.7 percentage points to the change in the total exports EPI”.

### Points contribution, re-weighting and link periods

The use of points contribution as an analytical tool is limited to comparison of those index numbers on the same weighting reference period. If a price index is rebased (and its weighting basis changed), it will not be possible to compare points contribution data on the old weighting basis with data from the new weighting basis. This means it is not possible to undertake points contribution analyses across a link period. Linking of price indexes is discussed in detail in the linking and re-referencing section above.

This limitation has particular impact on the International Trade Price Indexes, since these price indexes are re-weighted every year (with June quarter as the link period). This means that points contribution analyses cannot be undertaken, for example, in comparing price indexes from September quarter with price indexes from March quarter of the same calendar year. Such an analysis would bridge the June quarter link period and is therefore not possible.

### Quarterly and annual data

Price index figures are published on a quarterly, annually and a financial year basis. The index number for a financial year is the simple arithmetic average (mean) of the index numbers for the 4 quarters of that year. Index numbers for calendar years are not calculated by the ABS but can be derived by calculating the simple arithmetic average of the quarterly index numbers for the year concerned.

### Precision and rounding

To ensure consistency in the application of data produced from the price indexes, it is necessary for the ABS to adopt a set of consistent rounding conventions or rules for the calculation and presentation of data. These conventions strike a balance between maximising the usefulness of the data for analytical purposes and retaining a sense of the underlying precision of the estimates. These conventions need to be considered when using price index data for analytical or other special purposes.

Index numbers are always published to a reference of 100.0. Index numbers and percentage changes are always published to one decimal place, with the percentage changes being calculated from the rounded index numbers. Points contributions are published to two decimal places, with points contributions change being calculated from the rounded points contributions. Index numbers for periods longer than a single quarter (e.g. for financial years) are calculated as the simple arithmetic average of the relevant rounded quarterly index numbers. Percentage changes between these periods are calculated from the rounded average index numbers.