<p>This is so-called base shift. It was typically done every 5-10 years by various statistical offices, although now some do it on yearly basis.</p>
<p>The reason why this is done is that CPI does not actually look at all prices but just some sample of representative prices. This had to be done because, especially in the past, but to some extent even now, data collection is extremely expensive so statistical offices would not be able to afford to track all prices. Nowadays, there are indices that are more comprehensive like <a href="https://thebillionpricesproject.com/" rel="nofollow noreferrer">the billion prices project</a> but such methodology is not widely used by statistical offices yet.</p>
<p>However, using representative basket of goods introduces problem when consumer spending patterns shift, since to make index consistent you need to compare the prices of the same basket of goods. So once in a while statistical office selects new base and recalculates everything in terms of the basket of goods used in that year. This can be done even to the old data since what usually changes are shares of how much households spend on lets say food vs travel etc. This is pretty much the main or even only reason, other than this the selection of base is purely arbitrary but you might change it once in while to make graphs from raw data more readable (of course any researcher can easily rebase the CPI, but I suppose many sites that source data from statistical offices just take default raw data).</p>
<p>This <a href="https://www.cbs.nl/en-gb/background/2005/26/consumer-price-index" rel="nofollow noreferrer">CBS website</a> also further explains the base shift if you are interested.</p>

CC BY-SA 4.0
2023-08-25T09:24:33.443Z
That's what I call "a hell of an answer". Thank you SO much!
glezo
CC BY-SA 4.0
2023-08-23T10:56:06.893Z
2023-08-23T10:56:06.893Z
1muflon1
<p>I just realized that eurostat CPI index has three values of reference:</p>
<p>1996, 2005, 2015</p>
<pre><code>https://ec.europa.eu/eurostat/databrowser/view/PRC_HICP_MANR__custom_120601/bookmark/table?lang=en&amp;bookmarkId=952bcf60-22e8-433b-ab93-fe85e2ab2367

https://ec.europa.eu/eurostat/cache/metadata/en/prc_hicp_esms.htm#ref_period1682076048145
</code></pre>
<p>Being myself an engineer, not that familiar with economy KPIs, I wonder:</p>
<p>What need does this re-index tries to solve, or why is it performed?</p>
<p>Thank you so much!!</p>

<price-index>
KPIs re-indexing after some years
glezo
# KPIs re-indexing after some years

(Asked by: username_0 on 2023-08-23)

I just realized that eurostat CPI index has three values of reference:

1996, 2005, 2015

```
https://ec.europa.eu/eurostat/databrowser/view/PRC_HICP_MANR__custom_120601/bookmark/table?lang=en&bookmarkId=952bcf60-22e8-433b-ab93-fe85e2ab2367

https://ec.europa.eu/eurostat/cache/metadata/en/prc_hicp_esms.htm#ref_period1682076048145

```

Being myself an engineer, not that familiar with economy KPIs, I wonder:

What need does this re-index tries to solve, or why is it performed?

Thank you so much!!

**Tags:** price-index


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## 1 answers

### Answer by username_1 on 2023-08-23. Score: 1 | Accepted answer

This is so-called base shift. It was typically done every 5-10 years by various statistical offices, although now some do it on yearly basis.

The reason why this is done is that CPI does not actually look at all prices but just some sample of representative prices. This had to be done because, especially in the past, but to some extent even now, data collection is extremely expensive so statistical offices would not be able to afford to track all prices. Nowadays, there are indices that are more comprehensive like [the billion prices project](https://thebillionpricesproject.com/) but such methodology is not widely used by statistical offices yet.

However, using representative basket of goods introduces problem when consumer spending patterns shift, since to make index consistent you need to compare the prices of the same basket of goods. So once in a while statistical office selects new base and recalculates everything in terms of the basket of goods used in that year. This can be done even to the old data since what usually changes are shares of how much households spend on lets say food vs travel etc. This is pretty much the main or even only reason, other than this the selection of base is purely arbitrary but you might change it once in while to make graphs from raw data more readable (of course any researcher can easily rebase the CPI, but I suppose many sites that source data from statistical offices just take default raw data).

This [CBS website](https://www.cbs.nl/en-gb/background/2005/26/consumer-price-index) also further explains the base shift if you are interested.

> **Comments:**
> **username_0**: That's what I call "a hell of an answer". Thank you SO much!  

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