Comparison of price levels in Europe, 2014

National coverage in each of the 37 participant countries.

Annual data.

The reference period is the actual calendar year. Preliminary results are available in June, 6  months after the end of the reference year. These figures are revised in December, 12,  24 and 36 months after the end of the reference year. At that stage, the results are considered final in the sense that there will be no further updates when countries revise their National Accounts estimates.

The European Comparison Programme (ECP) is an international statistical project in which the National Statistical Offices of the participating countries are responsible for data collection in their respective countries, while the Statistical Office of the European Commission (Eurostat) and the Organisation for Economic Cooperation and Development (OECD) are responsible for calculating the results. The editing of input data is an interactive process between the participating countries and Eurostat. Participating countries provide a formal approval of their data before Eurostat and OECD calculate and publish the results.

Price data in anonymised form are stored in Eurostat’s production database. Statistics Norway stores micro data and information on sampling units and population according to the relevant safety regulations.

The purpose of the European Comparison Programme is to produce indicators of the relative price levels across participating countries. A central concept is the purchasing power parity (PPP), cf. "definitions".

The results of the ECP are used primarily in order to adjust national accounts aggregates for price level differences across countries, so that only spatial volumes are taken into consideration in international comparisons. For example, in comparing GDP per capita (which is composed of a price and a volume component), using the nominal exchange rate would lead to an overvaluation for countries with high price levels, while the opposite effect would occur for countries with low price levels.

The work is coordinated by Eurostat and the OECD. Eurostat coordinates the work in 37 European countries, including Norway, while OECD coordinates a similar exercise in the non-European OECD member states. The results from Eurostat and OECD are included in the International Comparison Program (ICP), which is carried out by the World Bank on behalf of the United Nations. The Statistical Office of the European Union started to finance around 70% of the work from 2011.

The first set of results which included data from Norway were released in 1980, followed by updated releases in 1985, 1990 and 1993. From 1995 onwards, results for Norway have been published by Eurostat on an annual basis. Every third year, the OECD prepares results for all OECD countries, as well as estimates based on extrapolation for the years in between.

The main institutional users are the European Commission and the International Monetary Fund (IMF). The basis for the distribution of funds to the EU’s poorer regions is the comparable, price level adjusted income level in the various regions. Purchasing power parities are an important input into these calculations, and thus the European Commission contributes substantially to the financing of the programme. In the IMF, price level adjusted GDP is one of several factors that determine the level of member states’ financial contribution.

In general terms, PPPs can be used as currency converters, as an alternative to the nominal exchange rate. PPPs are preferable to exchange rates if, for example, one wants to compute how much a given amount in country A is worth in country B, under the assumption that the same purchasing power should be maintained. PPPs are applied for this purpose in businesses, government administration, research, poverty analyses and the media.

Purchasing power parities are used not only for price level adjustments, but also in analyses of relative price levels.

Access to results prior to publication

While Statistics Norway is in charge of the collection and editing of the Norwegian input data, the results for all participating countries are first published by Eurostat. These results are then accessible to all users. Immediately after Eurostat's release, usually on the following day, Statistics Norway re-publishes the results on its website.

No external users have access to the statistics and analyses before they are published and accessible simultaneously for all users on ssb.no at 8 am. Prior to this, a minimum of three months' advance notice is given inthe Statistics Release Calendar. This is one of Statistics Norway’s key principles for ensuring that all users are treated equally.

The primary purpose of the ECP is to compute price level adjustment factors for national accounts. The basic classification used in the survey is thus the national accounts expenditures breakdown as defined in the European Standard of National Accounts (ESA2010).

In a population approach, the purchasing power parity for a given country in year t+1 should equal the purchasing power parity in year t multiplied by the price change in that country relative to a reference or base country. This provides a link to the CPI, although the ECP focuses on spatial rather than temporal comparability. However, it is not possible to reconstruct either statistic on the basis of the other.

The Statistics Act of June 16, 1989 number 54, §§2-2 and 2-3

Regulation (EC) No 1445/2007 of the European Parliament and of the Council of 11.December 2007.

The population is defined by the expenditure side of the National Accounts (cf. ESA) as final consumption in private households and non-profit organizations, government consumption and gross capital formation. This means that goods and services that are used for these purposes are covered by the price surveys.

Prices of goods and services for private consumption, investment goods and investment in buildings and civil engineering works are collected from establishments in surveys carried out simultaneously in all participating countries. The price collection for private consumption is divided into six surveys which are carried out in a three year cycle. The product sample for each survey is decided upon by the participating countries in close cooperation, and can vary considerably from one survey to the next.

Product sampling:The total number of products (goods and services) is around 2500. The sample is based on information on products and markets which is collected from businesses and business associations in each country. The sampling criteria are comparability, representativity and equi-representativity (see definitions).

Establishment sampling: The sample of establishments is drawn from the Central Register of Establishmentsand Enterprises at Statistics Norway and is the same sample used in the consumer price index (CPI). Samples are drawn on the basis of the establishments’ turnover. In addition, it is often necessary to supplement the sample on an ad hoc basis (purposive sampling).

Weights: Individual products priced within the framework of the ECP are aggregated up to more extensive consumer groups. From the lowest aggregate level (the "basic heading" level) and upwards, weighting is based on expenditure shares from national accounts.

For housing services, data from the Statistics Norway's Rental market survey and housing stock data are used.

The Norwegian Directorate of Health provides the input data in the hospital services survey.

Since government services have no economically significant market prices, one possible approach is to use salary cost in the government sector as an approximation. Salary data for a range of occupations defined in accordance with the"International Standard Classification of Occupations" (ISCO-08) are collected annually. This ensures comparability between countries. In Norway, the salary data are based on Statistics Norway’s Income and Wage Statistics. 

Government services consumed by private households’ neither have no market prices. This pertains to education and hospital services. The costs of educational services are estimated by Eurostat using a unit price per pupil or student on the basis of existing education statistics. For hospital services quasi-prices are estimated for a range of specified services such as heart surgeries, prostate surgeries and caesarians.

The capital goods survey is composed of one survey for investment goods and another survey for building and civil engineering projects. The survey for investment goods is undertaken every other year. The product sample is selected in cooperation among the participating countries, based on the same criteria as the survey for private consumption. For building and construction projects, prices are gathered annually from external experts.

Prices are mainly collected through shop visits, telephone and internet. In addition, for some groups of consumer goods, Statistics Norway receives electronic data from important establishments and business chains. Rental prices based on Statistics Norway’s Rental Market Survey and Population and Housing Census are gathered from the national accounts, while information on salary costs is gathered from Statistics Norway’s Income and Wage Statistics.

For the rest of private consumption data, the price collection is undertaken continuously over a three year period such that one third of private consumption is covered in a given year. For the years in between, survey results are extrapolated using CPI data as extrapolation factors.

Data on rents and on public sector salaries are collected annually. Prices of capital goods are collected every other year, while prices of construction projects are collected annually.

Weights based on national accounts expenditure shares and updated yearly.

Data editing is carried out in phases. Editing starts with intra-country assessment before submitting the price data to Eurostat. This intra-country phase checks the input data using a standardized extreme control at the product level in order to identify obvious mistakes. The next editing round is comparison of the Norwegian data against other participating countries in the survey- 37 countries. Eurostat calculates the final results after extensive control. Final check and approval rounds are done in all the countries before the final results are released.

Most countries collect capital city prices and thus are required to provide spatial adjustment factors with which to convert these prices to national average prices. All countries are also required to provide temporal adjustments factors to ensure that the prices represent the annual average. Spatial adjustments factors and temporal adjustment factors should be supplied for each basic heading. For seasonal products, special temporal adjustment factors should be supplied at product level.

The computation method used is the so-called Éltetö-Köves-Szulc (EKS) approach. This approach starts off with all participating countries’ average prices for each product within a basic heading. For each pair of countries, all possible bilateral price relatives are computed, first with the weights of the base country (Laspeyres-type indices), then with the weights of the reference country (Paasche-type indices) The geometric average of the Laspeyres and Paasche indices (Fisher-type indices) are made transitive by computing an unweighted geometric average of the Fisher indices for each pair of countries. These EKS indices are rebased to the average value across all countries. These rebased EKS indices are the final PPPs for the basic heading. PPPs at higher levels of aggregation are computed in the same way as the basic heading PPPs, except that numerical weights from National Accounts are applied in the aggregation process, and that arithmetic averages are used instead of geometric averages. For further information on the calculation of PPPs, see the Eurostat-OECD methodological manual on PPPs.

The CPI data is the source used in the seasonal adjustment work.

Data from respondents are used in accordance with the requirements of The Norwegian Data Protection Authority. The information is confidential (Statistics Act, § 2-4) and is stored and ultimately destroyed in accordance with strict security guidelines.

The production of purchasing power parities is in its nature an example of international statistical cooperation. The input data must therefore necessarily be made available to the participating countries’ national statistical institutes, Eurostat and the OECD.  However, data is anonymised before they are shared with the other participants in the programme.

External users can apply to Eurostat or the OECD in order to access these data for research purposes, provided that the data are not published.

The purchasing power parity survey is primarily a mapping of the participating countries’ relative price level at a given point in time. The primary focus is therefore a comparison between countries in a certain year, while comparability over time comes second. Time series created as a result of this work must be interpreted with caution, and even more so at lower levels of aggregation.

Price level adjustment of national accounts aggregates in current, domestic prices results in a time series in current, common prices. Therefore, one cannot calculate real growth on the basis of such a time series.