The Use of Alternative Data Source As a Proxy to Approach More Frequent Updates of CPI Expenditure Weight, Indonesia

The Consumer Price Index (CPI) is one of the key economic indicators widely used as a guide to make decisions and determine government policy effectiveness. This index is the most well-known inflation indicator that shows the household's price level of goods and services. BPS-Statistics Indonesia updates CPI monthly, and the compilation uses the expenditure weight from the Household Budget Survey held every five years. Facing a dynamic and rapid change in consumption behavior, using a fixed expenditure weight over a long period can be no longer relevant in describing the enormous shift in household expenditure patterns. The updated expenditure weight data would continuously provide the data user needs. However, conducting more frequent HBS requires additional cost. Regarding the importance of CPI, the index’s quality and measurement approach are necessarily improved and revised, including the methodologies and data sources. In Statistics Indonesia, one of the alternative data sources that portrays household expenditure is National Socio-Economic Survey (SUSENAS). The focus on this study is to exercise the approach in compile new CPI using weight expenditure derived from the alternative data sources, which are more frequently updated. The updated weights show slightly different of consumption pattern compared to the existing CPI weights. The CPI obtained from the updated weight are evaluated with distribution pattern, Relative Mean Square Error (RMSE), and Mean Percentage Absolute Error (MAPE). The alternative CPI is closely similar to some points of the existing CPI series, in which MAPE are 12.11% for weight expenditure and 0.30% for CPI. also, RMSE are 1.74 and 0.39 for the same indicators. It may conclude that using Susenas data as alternative data sources can be considered as a feasible method for generating more frequent of CPI expenditure weight, since particularly it can address towards latest condition in society and more relevant to updated consumption patterns in force majeure conditions specifically, such as The Covid-19 pandemic. However, this study is subject to several limitations. It can only update consumption expenditure despite the basket of commodities and challenges faced in mapping commodities captured from the alternative data source. BPSStatistics Indonesia will continue to review the strategy to implement the alternative weight in compiling CPI and we will conduct further studies as necessary.