The Practical Construction of a Chain Price Index Number

For measuring changes in consumer prices over long spans of years a chain index with annual links has substantial advantages over a traditional constant basket index. But to realise the benefits in full the chain index requires a greater flow of annual information. Not only must there be a continuing household expenditure survey to provide up-dated weights but there must also be a regular monitoring of shopping behaviour and up-dating of the retail outlet samples to follow changing shopping patterns. The ideal information from shops is difficult to obtain and keep up to date and this makes inevitable the use of approximate procedures at the lowest stages of the index calculations. If carefully handled these approximations are unlikely to introduce noticeable errors into a chain index.