Net Price Index

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Prices and Consumption, Economic Statistics
Martin Sædholm Nielsen
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Net Price Index 2024

The purpose of the net price index is to measure the development of the prices, less indirect taxes and duties and including price subsidies, charged to consumers for goods and services bought by private households in Denmark. The index of net retail prices has been calculated since 1980, but there are estimated figures for the development in net prices back to February 1975. The weights were last adjusted in connection with calculating the index for January 2014 and are based on private consumption expenditure in 2012.

Statistical presentation

The index of net retail prices shows the development of prices, minus indirect taxes plus subsidies, for goods and services bought by private households in Denmark. Thus, the index also covers foreign households' consumption expenditure in Denmark, but not Danish households' consumption expenditure abroad. The index shows the monthly changes in the costs (minus indirect taxes plus general subsidies) of buying a fixed basket of goods, the composition of which is made up in accordance with the households' consumption of goods and services.

The index of net retail prices can best be characterized as a fixed weight index of a Laspeyres-type. The prices that are included in the index of net retail prices are not the prices paid by the consumers, but the purchase prices after deduction of indirect taxes and addition of subsidies (to the extent possible). The only exception to this is rent payments where the total rent, i.e. the share of rent payments, is included. The weights are calculated on the basis of data from the national accounts on final consumption expenditure of households in Denmark, distributed among 70 commodity groups. For each of these, a further division is made by using the detailed information on consumption expenditure from the Household Budget Survey.

The price indices for April, May, June, July, August, September, October, November, December 2020 and January, February, March, April, May and June 2021 are more uncertain than usual, as the non-response rate has been significantly larger than normal and some businesses have been shut down due to COVID-19.

Statistical processing

The index of net retail prices is calculated on the basis of 23,000 prices collected from approx. 1,600 shops, companies and institutions throughout Denmark. Most prices are by far collected monthly. The data material received is examined for errors, both by computer (using the so called HB-method) and manually. The different goods and services, which are included in the index of net retail prices, are first grouped according to approx. 500 elementary aggregates for which elementary aggregate indices are calculated. The elementary aggregate indices are weighted together into sub-indices that are in turn aggregated into the total index of net retail prices. In calculating a price index it is assumed that the baskets of goods that are compared are identical, also with respect to the quality of the goods. Mainly indirect quality adjustment methods are being applied in the index of net retail prices in connection with changes in the sample. The index of net retail prices is not seasonally adjusted.

Relevance

The index of net retail prices is generally viewed as a reliable statistic based on the views of users.

Important users are among others the Ministry of Finance, The Ministry of Economic Affairs and the Interior, The Danish Central Bank and private banks and other financial organizations.

Accuracy and reliability

No calculation has been made of the uncertainty connected with sampling in the index of net retail prices as the sample is not randomly drawn, but the quality of the index of net retail prices is accessed to be high. In connection with COVID-19, uncertainty is greater than usual as it has been difficult to collect prices and many industries have been closed down.

In addition to the "general" uncertainty connected with sampling, there are a number of sources of potential bias in the net price index. One source is the consumers substitution between goods and shops and another source is changes in the sample.

Timeliness and punctuality

The index of net retail prices is published on the 10th or the first working day thereafter, following the month in which the data was collected.

The statistics are published without delay in relation to the scheduled date.

Comparability

The index of net retail prices is related to the European Union harmonized index of consumer prices (HICP).

The European Union harmonized index of consumer prices (HICP) is based on actual consumer prices, whereas the index of net retail prices is based on the purchase prices after deduction of indirect taxes and VAT and addition of subsidies (to the extent possible).

From January 2001, the only difference between the national index of net retail prices and the HICP is apart from the price concept the coverage of goods and services, as owner-occupied dwellings is only recorded in the index of net retail prices and not in the HICP.

The index of net retail prices is also related to the consumer price index. The two indices comprise the same groups of goods and services and are calculated according to the same methodology. Consequently, the only difference between the two indices is the price concept used, as indirect taxes and VAT are subtracted in the index of net retail prices, and the weighting.

Accessibility and clarity

These statistics are published monthly in a Danish press release and in the StatBank under Net Price Index.