Consumer Price Index

 1.    How is the Consumer Price Index (CPI) calculated?
The Consumer Price Index (CPI) is calculated by periodically aggregating the prices of a fixed basket of goods and services representing household spending, with data collected from various sales outlets across geographic regions. The index is computed by tracking price movements using the geometric Laspeyres formula, which relies on average prices. Using relative weights assigned to each item of goods and services based on spending patterns.
2.    Has the methodology for calculating the Consumer Price Index (CPI) changed from previous publications, and what are the differences?
The methodology for calculating the consumer basket weights has been updated to align with the latest international standards, based on the IMF’s Consumer Price Index Manual. The update included improvements in data collection methods, expansion of the basket of goods and services, and a review of the relative weights of the consumer basket based on the latest Household Income and Expenditure Survey data, in addition to complementary data sources (final household consumption expenditure and administrative records). The moving-average methodology was also applied to update relative importance annually, ensuring greater accuracy and flexibility in reflecting actual changes in consumption patterns.
3.    How often is the Consumer Price Index (CPI) published?
The CPI is published monthly, providing regularly updated data to support individuals, businesses, and policymakers in monitoring economic changes and making informed decisions.
4.    What are the main updates to the Consumer Price Index (CPI)?
Based on international best practices and the IMF Consumer Price Index Manual, the key updates focus on:
•    Expanding the basket to include new items, categories, and divisions of goods and services.
•     Updating relative weights based on current spending patterns.
•    Reviewing geographic coverage and data collection methods, leveraging technology to update the sample frame and increase the number of sales points. 
•    Diversifying data sources to include centralized collection from multiple entities, administrative records such as the Ejar platform, and field surveys of sales points.
•     Adopting the new COICOP 2018 classification for individual consumption and linking it with the previous COICOP 1999 classification. 
•    Adding new levels for consumption categories.
•    Applying a moving-average methodology with annual updates of relative weights to reflect the latest economic changes.
5.    How are goods and services selected for inclusion in the Consumer Price Index (CPI) basket?
Goods and services included in the CPI basket are selected based on the results of a comprehensive household income and expenditure survey, which analyzes spending patterns and the distribution of household budgets across various consumption items. The selection process focuses on goods and services that form an essential part of household consumption and meet daily needs, taking into account variations in living patterns across different population segments. 
The basket is reviewed periodically to update it in line with economic and social changes, such as the emergence of new goods and services or changes in the importance of certain items due to shifts in preferences and consumption patterns. Items with very limited impact or expenditure are excluded to ensure an accurate and realistic representation of the local market.  Additionally, selected goods and services must be priceable and available across sales outlets in all geographic regions, ensuring comprehensive coverage and fair representation of all social and economic groups.
6.    How are the relative weights of different goods and services in the index determined?
Weights are determined based on the proportion of household expenditure on each good or service, using data from the 2023 Household Income and Expenditure Survey, in addition to final household consumption expenditure from national accounts. These weights are reviewed and updated annually to reflect changes in prices for each consumption item, ensuring that the index accurately represents actual spending patterns.
Accordingly, the CPI basket now includes 582 items, compared to 490 previously. Items with a relative importance of 0.001% or more are included in the basket, with weights calculated for each item across all regions of the Kingdom by dividing the expenditure on the item by total household expenditure.
Differences in spending patterns and structure across the Kingdom’s thirteen regions are taken into account, with weights distributed among regions based on the 2023 Household Income and Expenditure Survey results and then further allocated to cities within each region according to the 2022 Census data.
7.    What is the methodology for periodically reviewing and updating items and weights?
Previously, items and weights were reviewed at least every five years using data from the Household Income and Expenditure Survey to ensure they reflected the current economic reality. Based on international best practices and the IMF Consumer Price Index Manual, the moving-average methodology has now been applied, updating items and weights annually using the yearly results of final household consumption expenditure from national accounts.
8.    Why have the relative importance weights of some sections or categories changed from the previous methodology?
The changes in relative importance reflect actual shifts in Saudi household spending patterns, based on the latest Household Income and Expenditure Survey and the annual results of final household consumption expenditure from national accounts. These account for the impact of economic and social changes, such as shifts in spending priorities and the adoption of new consumption patterns. 
Additionally, the new update adopted the COICOP 2018 classification, which introduced a new section and redistributed some items among different sections. This reclassification helped adjust the relative weights of sections to better reflect the current reality. Furthermore, the inclusion of additional new items and changes in the relative importance of some items led to noticeable differences when compared to previous updates.
9.    What are the data sources used to calculate the Consumer Price Index (CPI)?
A variety of data sources and statistics are used to ensure the accuracy and comprehensiveness of the calculations.  These data are collected through several mechanisms, primarily including:
•    Household Income and Expenditure Survey: this survey is used to determine consumption patterns and to establish the relative weights of goods and services in the consumer basket.
•    Centralized data collection: data are collected centrally from multiple governmental and non-governmental entities, allowing for comprehensive aggregation of information on goods and services prices.
•    Register-based data: for example, data extracted from platforms like "Ejar," which provide information on rental prices, helping to improve the accuracy of calculations related to rents.
•    Household Final Consumption Expenditure (HFCE): data representing the total household expenditure on goods and services, derived from the supply and use tables issued by the national accounts.
•    Field survey of goods and services prices: this survey monitors the actual prices of goods and services in local markets, ensuring accurate representation of prices across different regions.
10.    What methodology is used to ensure the optimal distribution of sales points and their geographic representation?
To ensure the sample of sales points is representative of all regions of the Kingdom. A precise methodology and modern technologies were employed to define the sales point framework, integrating population census data to study population density at the neighborhood level within cities.
Representative cities within the sample were selected based on geographic and demographic criteria to achieve comprehensive and accurate representation of all thirteen administrative regions of the Kingdom. As a result, the number of cities included in the sample increased from 16 in the previous index to 23 in the new update, providing broader and more comprehensive coverage of price changes within cities and across regions.
11.    How was the Consumer Price Index (CPI) linked to the previous time series after the update? 
The CPI was linked to the previous time series following the methodology outlined in the IMF manual.
To ensure continuity and comparability across periods, linking factors were applied between the old and new series. These factors were calculated based on the rate of change in the indices during the transition period and were used to adjust previous values in line with the new reference year, 2023.
The linking process was carried out over multiple time periods within the historical series using statistical methods that account for methodological differences. The revised time series, covering 2013 to the present, has been reviewed and published, ensuring all data are consistent with the new reference year and allowing researchers and policymakers to track inflation trends and price changes accurately and continuously.
For more technical details, please refer to the detailed methodology published by GASTAT.
12.    What are the improvements regarding the level of detail?
 In addition to publishing the overall Consumer Price Index (CPI) at the regional level instead of the city level, the update includes publishing additional indicators covering multiple areas to provide a more comprehensive view of the market. These indicators include:
•    The index for basic materials: Excludes the most volatile items (such as food, beverages, and energy) to provide a stable measure of inflation.
•    CPI for durable, non-durable, and semi-durable goods: To measure the differences between long-term use goods (e.g., cars and furniture) and goods consumed immediately (e.g., food and beverages).
•    Services index: To measure changes in the cost of services such as transportation, education, and healthcare.
13.    What are moving averages, and how are they linked to the time series data?
Moving averages are a statistical methodology that updates the weights of the Consumer Price Index (CPI) basket annually, instead of relying on a fixed base year with static weights used for several years based on the Household Income and Expenditure Survey (usually every three to five years). This approach provides flexibility in representing consumption patterns and adapting to rapid economic changes, such as shifts in consumption habits or the introduction of new products. CPI results at the beginning of each calendar year are linked to the updated weights using a linking factor, creating a consistent and dynamic time series that more accurately reflects the economic reality. 
14.    What is the Classification of Individual Consumption by Purpose (COICOP 2018) and its purpose?
An international reference classification issued by the United Nations Statistics Division. It is used to organize and classify household expenditure on goods and services according to the purpose of their use. Its purpose is to facilitate statistical and comparative analysis of consumption patterns across countries and sectors, serving as a standard tool to harmonize data related to individual consumption. The classification consists of 13 main sections representing household consumption and includes six levels of detail, which are: section, group, class, category, subcategory, and item. It is mainly used in constructing the Consumer Price Index (CPI) to classify the components of the consumption basket according to their purpose of use.
15.     What are the main changes in the new classification of goods and services within the basket?
The key updates applied to the consumer basket are as follows:
•    Addition of a separate section for insurance and financial services.
•    Inclusion and exclusion of goods and services in the CPI basket to reflect changes in consumption patterns.
•    Expansion of the classification levels of the basket from 4 levels to 6 levels.
•    Adjustment of the overall basket weights to align with the results of final household consumption expenditure.
•     Reclassification and redistribution of some basket items within the main sections, according to the latest update of the international standard classification of consumption (COICOP 2018).
16.    What is the frequency of updating the relative importance of consumer basket items under the updated methodology?
The relative importance (weights) of the consumer basket items will be updated annually, based on household consumption patterns.
17.    Why was 2023 chosen as the new base year?
The latest Household Income and Expenditure Survey was conducted in 2023.
18.    How can researchers and interested parties access the methodology details?
By referring to the methodology published on the official website of GASTAT.
19.    Were international organizations involved in reviewing the methodology?
Yes, the expertise and practices of several international organizations were utilized.
20.    Was there coordination with other relevant entities in reviewing the methodology?
GASTAT operates independently in its statistical work, adhering to international practices and standards that ensure neutrality and prevent influence on the results. However, coordination with relevant entities is conducted to ensure compliance with national, regional, and international requirements.
21.    What is the difference between the base year and the reference year in calculating the Consumer Price Index (CPI)?
The difference between the base year and the reference year is as follows:
•    Base Year: the year used as a temporary reference when reviewing the weights of the consumer basket. GASTAT reviews this year annually within the moving time series methodology, which aims to link different base years to the reference year, ensuring the consistency of the index and its alignment with changes in consumption patterns.
•    Reference Year: the year in which the Consumer Price Index (CPI) is set to 100 (for example, 100 = 2023) and serves as a fixed point for comparison over time.  This year is used to analyze price changes and accurately measure inflation or deflation rates, providing a stable basis for statistical analysis.