COICOP - Classification

Question 1

COICOP?

Answer 1

Breaks down CPI
Classification of individual consumption according to purpose
Devised by UN, used by most countries for CPI

Part of UN System of National Accounts (SNA). 1968 SNA introduced the 8 divisions ofClassification of Goods and Services. Became COICOP in 1993. In 1999 UN agreed the current framework (COICOP 1999). Currently undergoing a major review by expert group for UN Department of Economic and Social affairs, Statistics division1, the new COICOP2018

Question 2

COICOP - how does it work?

Answer 2

COICOP 1999 used in UK
* CPI built from prices of g/s
* COICOP allocates these into sets according to purpose – division, group and class
* CPI has a number of items
* price quotes collected for specific products that fall within that item (ab 100k per month in UK)
* Item prices then combined and fed into the levels

Question 3

Levels - Divisions?

Answer 3

12 Divisions - 2 digit
01. Food and Non-Alcoholic Beverages.
02. Alcohol, Tobacco and Narcotics.
03. Clothing and Footwear.
04. Housing, Water, electricity, Gas and other fuels.
05. Furnishings, household equipment and routine household maintenance.
06. Health.
07. Transport.
08. Communications.
09. Recreation and culture
10. Education.
11. Restaurants and Hotels
12. Miscellaneous Goods and Services

2 others not in CPI -
(13. Individual consumption expenditure of non-profit institutions serving households, and 14. Individual consumption expenditure of general government)

Question 4

Levels - Groups?

Answer 4

Within each division, we have groups (totalling 47)
Three digit

e.g., within division 1
- 01.1 Food
01.2 Non-alcoholic beverages

Question 5

Levels - Classes?

Answer 5

47 groups broken into 117 classes
4 digit

e.g., Divisions 11 and 12, 9 groups and 18 classes

Div 11. Restaurants and Hotels

11.1 Catering services
11.2 Accommodation services

11.1.1 Restaurants, cafes and the like
11.1.2 Canteens
11.2.0 Accommodation services

e.g., 12.5 Insurance
Broken down into 5 classes e.g., 12.5.1 Life insurance

When group and class are the same - the last digit of the class is 0

Question 6

COICOP 2018?

Answer 6

What to expect when ONs shifts to this new classification regime

1. Adds a division splitting 12.) Miscellaneous G/S into 12.) Insurance and finance services and 13.) Personal care, social protection and miscellaneous G/S - divisions 13 and 14 become 14 and 15
2. More detail - 5 more groups and 71 new classes
   334 5-digit sub-classes
   e.g., class 01.1.6 Fruit and nuts broken into 9 5 digit sub-classes - 01.1.6.1 Dates, figs and tropical fruit, fresh etc.
3. Updates some divisions - 8 renamed information and communication - postal services moved from 8 to 7 (transport)
   Many detailed changes to reflect changes in technology and other factors

Question 7

Expenditure weights?

Answer 7

• each category has an expenditure weight
• CPI – housing has a big weight, almost 30%
• of 294 weight in feb 2017, 174 was imputed rents for OOH
• CPI weights – same as CPIH, scaled down for absence of OOH
• numbers expressed out of 1000%
• weights don’t change much over time at div level – are changes at finer levels of disaggregation
• partly due to changes in expenditure behaviour but also in methodology (how items are allocated)

Question 8

How have the divisions been behaving?

Answer 8

Long secular trends
* div 3 clothing and footwear declining
* div 10 education increasing
* div 2 alcohol and tobacco increasing

ONS also published indices for groups since 1996 -
Div 02 (Alcohol, tobacco)….No Narcotics, as these were only introduced a few years ago.

Big increase in Tobacco (tax): 1996=30 to 2015=100
Increase in Wines and spirits post 2008 (devaluation) (1996=75, 2015=100).
Beer less affected (some beers non-traded?): was around 100 in 1999-2001 and 2015

Question 9

CPI spreadsheet?

Answer 9

Updated once per year
Indices for groups and classes (subclasses just starting)

Question 10

Items?

Answer 10

• items – descriptions of items found in shops or online
• 750 items for price collection as part of constructing CPI

Column with CPIH weight and another with Representative items

• representative items diff to CPI as ONS decided how many items are needed to capture the weighting

highest is 4 Housing & HH services with 27.6% weight

Question 11

Why do some sectors have a lot of items?

Answer 11

• intrinsic interest – food, housing, transport important for policy
• bc of variability and diversity within level
• bc expenditure share is high
• e.g., food large share as food and nutrition important in studies of health and poverty
• housing v large weight relative to items as there is little diversity in housing costs

Question 12

Where do the weights come from?

Answer 12

• expenditure weights – CPI and CPIH cover all expenditure within the UK by –
• private HH
• residents of institutions (students in halls, nursing homes)
• visitors to UK
• like consumption part of GDP
• RPI exc top 4% of HH by income, exc pensioners, tourists
• historic reasons as RPI was to represent cost of living for working HH in UK