The Consumer Price Index (CPI) measure the change of the prices of a fixed basket of goods and services from base period to the current period. The base period is now December 2015 and will be changed in the next base revision.

The Consumer Price Index is used for different purposes:

- As a measuring of inflation rate in Albania
- As a deflators for the National Account
- As a deflator for Short Term Statistics
- For compensation of change in the cost of living of households
- As a base for wage negotiations and other agreements
- As a target variable for macro-economic policy, especially
- Monetary policy of the central bank of Albania

**History**

The first official Consumer Price Index was calculated in December1991 having the based period December 1990. In 1991 the Institute of Statistics (Directory of Statistics under Ministry of Finance) also calculates the CPI for December 1989 and December 1990. From 1992 and onward monthly CPI have been calculated. The result of the Household Budget Survey (HBS), carry out by INSTAT in 1993 was used for revising of the consumer basket of the CPI. In 1993 the CPI was calculated considering the December 1993 as based period. The basket of items has 221 items and the expenditure was classification in 8 main groups. In 2000 INSTAT produced a new HBS and those results are used on revision of the basket of CPI. The December 2001 was considered as based period and in the basket of the items was included 262 items and the expenditure the first time were classified in 12 main groups by COICOP classification.

In 2007 the basket of items was updated based on the results of Household Budget Survey realized during September 2006 to October 2007. From January 2008 and on Index is calculated considering the month of December 2007 as base period.

In January of each year some methodological changes and new developments were carried out in CPI:

- Update of weights: Weights are changed; they are now based on the average expenditure from 2017 Household Budget Survey.
- Update of basket: The basket content 331 goods and service.
- Update of list of the outlets where the prices are collected is updated.

**Structure of CPI**

**Classification**

We use the international ECOICOP classification of consumer goods and services to organize the list of items for consumption. Based on this classification the expenditures are classified in 12 main groups such as:

- Food and non-alcoholic beverage
- Alcoholic beverages and tobacco
- Clothing and footwear
- Housing, water, electricity gas and other fuel
- Furniture household and maintenance
- Medical care
- Transportation
- Communication
- Recreation and culture
- Education
- Hotels, coffee-house and restaurant
- Other goods and service

Under the main groups there are some subgroups in two levels.

Indices

The Consumer Price Index is calculation in the above hierarchy:

- Total index (CPI)
- Index by 12 main groups
- Index by subgroups
- Index by product

This hierarchy of CPI is calculated in national level and for each region.

**Coverage**

Geographical coverage

Albania has 12 regions and CPI is using 11 where Kukës are covered by Dibër region. The weights are constructed take in consideration urban and rural consumption. The prices are collected only in the urban area. Prices are collected in different type of outlets. To draw the sample of outlets we are based on the two criteria:

Based on the type of outlets we collect price in specialized shops, mini market, open market and different kind of services. Based on the location we collect price in the center of the central city and in suburban areas.

Product coverage

The results of HBS 2017 were used to select the items of the basket. For this it is worked on a file of household expenditures with at about 478 items, classified by ECOICOP-6 digit classification.

Based on the Commission Regulation (EC) No 2454/97 date 10 December 1997, for the fulfilling of standards for the calculation of the weights of items in conformity with the law no. 2494/95 for the implementation of HICP, and the Regulation No 1687/98 for the fulfilling of standards on the coverage of goods and services, the selection of items is based on two basic criteria:

- The percentage of expenditures of each item is given as part per thousand (0.001) to the total of

expenditures.

- The coverage on the ECOICOP-5 digit level

Price collections

Prices are collected only in the urban area. The regional statistical office of 11 cities used to collect the price are Berat, Diber, Durres, Elbasan, Fier, Gjirokastër, Korçë, Lezhë, Shkodër, Tiranë, Vlorë. The time of collection of the price is during 10-25 of each month. In each city prices for each item are collected in 8 -10 outlet. We collect about 30030 individual prices every month. The sample size of outlets is round 3500. We used a standard form for collection of the price. The price collectors enter the prices in the Excel format form and calculate price relative for each item. The data is transmitted to the Institute of Statistics (INSTAT) on the 30th of each month.

**Calculation of CPI**

Calculation of the weights

We have tree type of weights.

- The national product weights
- The product weights for each region,
- The geographic weights

Based on the Commission Regulation (EC) No 2454/97 date 10 December 1997, for the fulfilling of the standards to calculate the weights of items in conformity with the Law No 2494/95 for the implementation of HICP, the weights are kept unchanged during one year. The basis source to calculate the weights of the items are: the final expenditures of household consumption (HFMCE), taking out all non monetary expenditures.

- Expenditures (coverage) used are based on the national concept of expenditures where are included:

Expenditures of resident Albanian households done within and out the territory of the country

- Expenditures of institutional households(not significant weight in NA)

Expenditures (periodicity): expenditures to be used represent average expenditures of the year t-2,

In practice in cases when HBS is the basis source to calculate GDP with the method of expenditures and when HBS is in a more detailed level, the results of this survey are used to generate the weights of the items in a 6_digit level. The weights of articles not selected are distributed proportionally to other similar items.

The weights of items generated from HBS_2017 will be compared with the weights calculated by National Accounts Sector and will be reevaluated where it is necessary.

In practice there will be reevaluated the weights for:

- Alcoholic beverages and tobacco (expenditures for these products usually are not declared in HBS)
- Imputed rent (National Accounts use another method to estimate imputed rent and it is considered as being more precise that the method of interviews)
- Assurances (Based on the Commission Regulation (EC) No 1617/4999 date 23 July, for the implementation of the Law no. 2497/95, to treat the assurances based on this Law the weights have to be calculated considering expenditures of three years).

Calculation of index

The regional product weights are used for calculation of the index in regional level. The geographic weights and national product weights are used to calculate index in the national level. Weights are the proportions of the item expenditure to the sum of the expenditure.

Where: *W* is weights of the product and *CE* is consumer expenditure.

The Consumer Price Index of Albania is a Laspeyres type index:

With weights (w = P*Q) from base period this is approximated to:

In more detailed price relative is calculated for each item and region with geometrical mean on the sample of outlets:

The CPI is calculated in national level and also in regional level. The first step is to calculate the price relative for each item in each region. We use the geometric means of price ratios between current with previous month for calculation of price relatives.

Chaining from December of previous year gives the price relative from the base period:

The regional CPI is calculated (but is not published).

To calculate the national CPI the price relatives are aggregated geographically to form product indices on items for whole Albania:

Where: (for all cases)

Aggregation over items then gives the national CPI of Albania:

Where:

General background

Definitions

P price

PR price relative

I index

CPI Consumer Price Index

RCPI Regional Consumer Price Index

t time period t

t=0 base period

r geographical weights

w item weights

j numbering of regions

i numbering of items

Imputation of the prices

For the seasonal items which disappear from the market place during one or more months of the years the price relative is imputed with the price relative of the group where this item is included. This same methodology can also be used for no seasonal items that disappear from the market place on a temporary basis.

Publication

The Consumer Price Index is published on 8th of each month for the previous month.

The following publications include CPI and are published regularly:

- Monthly publication “Consumer Price Index”
- Quarterly bulletin “Statistics”
- Yearly publication “Albania in Figure”
- In “Statistical Yearbook”.

With the monthly publications the CPI is also published on Web site of INSTAT: www.instat.gov.al