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Workshop: "Problems in measuring inflation" Skopje, 22 May 2007

HICP, past achievements and future challenges Jarko PASANEN Unit D-4: Price Statisticsjarko.pasanen@ec.europa.eu

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GENERAL BACKGROUND

Required by EU Treaty (Maastricht Treaty)

The HICPs (Harmonized Indices of Consumer Prices) are a set of EU Consumer Price Indices calculated according to a harmonized approach

The HICPs are used for: assessing price convergence in the EU, for monitoring price stability in the euro area, for indexing social benefits or contracts and as input to other economic analysis

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Development started 1993; First published 1997 Methodology based on minimum standards practices

– Generated in cooperation with CPI experts – Removing obvious biases and non-comparabilities

Designed for International Comparison

Produce comparable and reliable Price Indices

Standards in form of binding regulations

Compliance monitored regularly

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LEGAL FRAMEWORK Article 121 of the Treaty and Article 1 of the protocol

on the convergence criteria state that inflation should be measured on a comparable basis.

Council Regulation (EC) No 2494/95 of October 1995 concerning harmonized indices of consumer prices (the so-called framework HICP Council Regulation) to answer the need for EU’s fiscal and monetary

authorities to have regular and timely consumer price indices for the purpose of providing comparisons of inflation in the macro-economic and international context

15 implementing Commission and Council Regulations

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1. Initial implementing measures (1749/1996)2. Sub-indices (2214/1996)3. Weights (2454/1997)4. Coverage of goods and services (1687/1998)5. Geographic and population coverage (1688/1998)6. Treatment of tariffs (2646/1998)7. Treatment of insurance (1617/1999)8. Revised sub-indices (1749/1999)9. Treatment of products in the health, education and social

protection sectors (2166/1999)10. Timing of entering purchaser prices (2601/2000)11. Treatment of price reductions (2602/2000)12. Treatment of service charges (1920/2001 and corrigenda) 13. Minimum standards for revisions (1921/2001 and corrigenda)14. Common index reference period (1708/2005)15. Temporal coverage of price collection (701/2006)

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The key HICPs are:

The Monetary Union Index of Consumer Prices (MUICP)

aggregate indices covering the countries in the euro area

The ‘flash estimate’ for the MUICP

The European Index of Consumer Prices (EICP) euro area plus the other EU countries

The national HICPs for each of the EU Member States

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DATA REQUIREMENTS monthly indices delivered according to a strict pre-

announced schedule (on average at the 14th day of every month), compiled and classified according to COICOP/HICP

price-updated annual weights

SDDS – methodological documentation

Member States must provide Eurostat at its request with the information necessary to assess compliance with the harmonized standards

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PRIORITIES AND FUTURE WORK

Incorporation of owner-occupied housing expenditure in the consumption basket underlying the HICP OOH pilot project

Standards and harmonisation of quality adjustment and sampling methods Quality Adjustment standards

Revision of Regulation (EC) No 1749/96, on sampling and quality adjustment

Specific standards on clothing, footwear, books, CDs, computer games and cars

CENEX Sampling

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PRIORITIES AND FUTURE WORK, cont’d

Treatment of seasonal products Development of the COICOP/HICP classification Consolidation and codification of the HICP legal

framework

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HICP - National Dimension

Countries are Responsible for implementation of Regulations covering the

HICP Responsible for compilation and transmission of national

HICP to Eurostat Responsible for Quality Control Invited to contribute to further input to the EU harmonization

process

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Some remarks

HICP legislation is a part of AcquisBut HICP data required even before accessionBetter implement as soon as possibleTake full advantage of Twinning

Regulations are guidance in form of legislationEmphasis on the content, not on the form

HICP standards are a moving target Important to take part in the work (e.g. WG discussions)

Utilise synergies between CPI and HICPHICP can be largely based on CPI

Eurostat will provide advice and assistance

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FURTHER INFORMATION

HICP dedicated section on Eurostat’s website: http://ec.europa.eu/eurostat

special topics HICP