Patrick Kelly and Lee Everts Aim of this pape r To demonstrate a - - PowerPoint PPT Presentation

Patrick Kelly and Lee Everts

Clothing in the South Afric an CPI: E xc lusion of c le ar anc e sale s

Aim of this pape r

To demonstrate a simple method for dealing with clothing prices in absence of quality adjustments

Patte rn of c lothing and footwe ar ove r long pe riod

20 40 60 80 100 120 140 160

Jan-88 Jul-88 Jan-89 Jul-89 Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07

Period Index CPI_metro Clothing and Footwear

Unde rstanding c lothing de flation from 2003

Deflation initially attributed to cheap imports from East Corroborated by anecdotal information from retailers By mid 2006, general inflation accelerating Clothing retailers reporting internal inflation Certain private sector analysts raise questions about validity of continued clothing deflation

Change in pr ic e c olle c tion me thod

Pre 2005

• Questionnaires dispatched to retailers (head office)
• Chain stores provide one price (average)

― Problem: cannot track regional variations ― No indication of availability

• Strict specifications - Woman’s summer blouse, short sleeves, made

from 100% synthetic fabric.

Post 2005

• Price collectors deployed through the country
• Specifications not changed
• Specific item identified and described for pricing in future

months

T ypic al pr ic ing be haviour

F ashion/ se asonal ite ms vs non fashion/seasonal items

Seasonal patterns not strong Item comes onto rack at certain price Remains at same price for season (+6 months) End of season: two stages of sales

• General price reduction
• Final stock clearance

Substitute item comes in at higher price (usually)

Colle c tion me thod bias on pric ing tre nds

Old method: capturing an average price, will reflect price change when substitute item is introduced New method: tracking specific item, captures entry price, then price drop at end of season New item then initiated and spliced in at same price level as previous item ended Leads to deflationary trend

IL O manual

“Sale or special offer prices should be recorded if these are either temporary reductions on goods that are likely to be available again at normal prices or are stock-clearing sales (such as January sales or summer sales). Special purchases of end-of-range, damaged, shop-soiled or defective goods should not normally be priced, as they are likely not to be the same quality as, or comparable with, goods previously priced and are unlikely to be available in

• future. If the special offer is limited to the first customers,

the item should not be priced, as the offer is not available to everyone…..”

Inte r national pr e c e de nts

Many countries require that discounted products be available in adequate quantities to be eligible for pricing and employ quality adjustment techniques Some exclude discount prices if they are not expected to return to normal price

Ne w South Afr ic an pr ac tic e

All end of season discounts are considered to be of a permanent nature and with limited availability When an item is discounted then this is recorded by the price collector on the form. The discount price is recorded but is not used in index calculation The following month the price collector receives a form requiring identification of a substitute item

Me thod of introduc tion

Change-over introduced in January 2008 Took a conservative (strict) view of principle of non revision of historical numbers Compared

2007 indices 2008 indices Included discounted prices Excluded discount prices Deflationary Inflationary

Resulted in steep month on month increase from Dec 07 to Jan 08

CPI Clothing and Footwear

60 65 70 75 80 85 90 95

Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08

Period Index

Clothing and footwear Clothing Footwear

Re ac tion to c hange

Outcry over the big jump in January Stats SA committed to publishing the extent of upward bias created by the method of introduction Bias calculated by creating a non discounted index for 2007 and comparing difference between change in this, with change in published index

Contribution of clothing to all items % y/y Contribution of clothing to all items % y/y Upward bias to all items % y/y from clothing Non-discounted on discounted Non-discounted on non-discounted Jan-08 0,174 0,016 0,158 Feb-08 0,186 0,014 0,172 Mar-08 0,201 0,012 0,189 Apr-08 0,205 0,014 0,191 May-08 0,209 0,014 0,195 Jun-08 0,218 0,011 0,207 Jul-08 0,239 0,018 0,221 Aug-08 0,289 0,025 0,264 Sep-08 0,296 0,024 0,271 Oct-08 0,309 0,029 0,280 Nov-08 0,307 0,028 0,279 Dec-08 0,318 0,035 0,283 Period

Extent of bias in headline CPI from change in clothing

Change s to c lothing in 2009

Major changes to many aspects of CPI in 2009 as part of reweighting and overhaul Change in clothing is to move away from many narrow products to few broadly defined categories

Change s to c lothing in 2009 Old de sc r iption Ne w de sc r iption

'BLOUSE - SUMMER - SHORT SLEEVE/SLEEVELESS - Made from SYNTHETIC FABRIC Blouse 'TROUSERS - SUMMER - Made from NATURAL FABRIC Trousers (excl jeans) - business 'CARDIGAN - WINTER - LONG SLEEVE Knitwear It is responsibility of price collector to identify most popular item in particular store

Clothing and footwear (M etro)

95 96 97 98 99 100 101 102 103 104 105 Jan

• 08 Feb-08 M

ar-08 Apr-08 M ay-08 Ju n

• 08 Jul-08 Au

g-08 Sep-08 O ct-08 N

• v-08 Dec-08 Jan
• 09 Feb-09 M

ar-09 Period Index Clothing an d footw ear Clothing Footw ear

T hank you

Rental survey