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| I. Analytical Framework, Concepts, Definitions, and Classifications |
2.1.1 Concepts and definitions Statistical concept Harmonised Indices of Consumer Prices (HICPs) are harmonized inflation figures required under Article 121 of the Treaty of Amsterdam (109j of the Treaty on European Union). They are designed for international comparison of consumer price inflation. HICPs are compiled on the basis of a legislated methodology, binding for all Member States (MSs). The focus is on quality and comparability among the indices of different countries as well as on their relative movements. The HICPs aim at measuring “pure” price changes using a harmonized methodology. In order to achieve this, a number of regulations set the technical frame. They cover among other things minimum standards for quality adjustment, sampling, coverage and basic aggregation formula (see Compendium of HICP reference documents). The HICPs are Laspeyres-type indices. Definition of indicators HICPs form the basis for the Monetary Union Index of Consumer Prices (MUICP), the European Index of Consumer Prices (EICP) and the European Economic Area Index of Consumer Prices (EEAICP). The EICP is the official index and is defined in Council Regulation (EC) No 2494/95 of 23 October 1995. 2.3.1 Classification/sectorization Classification system and conformity with official standards COICOP/HICP (Classification of Individual Consumption by Purpose Adapted to the Needs of Harmonized Indices of Consumer Prices). |
| II. Scope of the data |
2.2.1 Scope Scope of the data Geographical coverage The Harmonized Index of Consumer prices (HICP) is disseminated for the euro area and the European Union as a whole, for each EU member and for Norway and Iceland. Statistical units See "Statistical Population". statistical population Product coverage of HICPs is defined in terms of “household final monetary consumption expenditure” (HFMCE), by reference to the national account concepts in the European System of Accounts (ESA 1995, see Eurostat’s classification server RAMON). Population coverage of HICPs: The household sector consists of households which include all individuals or groups of individuals (as defined in ESA 2.76.a and 2.76.b) irrespective of, in particular, the type of area in which they live, their position in the income distribution and their nationality or residence status. It includes individuals living in institutional households (as defined in ESA 2.76.b). It does not include businesses. The economic territory is as defined in ESA 2.05 except that the extraterritorial enclaves situated within the boundaries of the country are included and the territorial enclaves situated in the rest of the world are excluded. The practical implications of these definitions are, that the geographical and population coverage is of all purchases by households within the territory of a country; those by both resident and non-resident households (the so-called “domestic concept”). HICPs cover the prices paid for goods and services in monetary transactions. The prices measured are those actually faced by consumers. The HICPs exclude interest and credit charges, regarding them as financing costs rather than consumption expenditure. Product coverage has risen from approx. 94% of HFMCE in January 1997 to virtually full coverage of household final monetary consumption spending in January 2001. The extensions in January 2001 concerned mainly health, education, and social protection sectors, certain insurance and financial services, and certain tax-like charges in connection with housing. Previously, only non-subsidised goods and services were covered in the health, education, and social protection sectors. Insurance and financial services have been extended with health insurance and fees of investment counsellors. For tax-like housing charges only charges according to consumption for water and sewerage, were covered previously but now all separately identifiable charges are covered as long as they are not financed out of general taxation. Further links: HICP short guide for users and Compendium of HICP reference documents. For specific questions on HICP methodology, you can send an e-mail to our central mailbox on HICP methods. |
| III. Accounting Conventions |
2.4.2 Recording basis Recording of transactions Recording of transactions is done by National Statistical Institutes. |
| IV. Nature of the Basic Data Sources |
3.1.1 Source data collection programs Data sources used Product selection, sampling and data collection is carried out by National Statistical Institutes. There is a variety of data sources both for weights (National Account data, Household Budget Survey data etc.) and prices (visits to local retailers and service providers and central collection via mail, telephone, email and the internet are used). Type of survey Chosen by National Statistical Institutes. Techniques of data collection The price collection methods are chosen by National Statistical Institutes as far as they ensure sufficient coverage and timeliness. The Member States’ HICPs are supplied by the National Statistical Institutes; the aggregate indices of MUICP, EU-15 and EU-25 HICPs, EICP and EEAICP are compiled by Eurostat. |
| V. Compilation Practices |
3.3.1 Source data statistical techniques Compilation of European aggregates Adjustments for quality change: As HICP aims at measuring "pure" price changes, it should be unaffected by changes in quality of products. Prices therefore need to be adjusted for changes in quality of the goods and services. Differences between Member States' quality adjustment procedures could give rise to major differences in the results. The HICP is constructed according to rules which forbid certain extreme practices, such as “automatic linking”, i.e. the assumption that the difference in price between two successive models is wholly attributable to a difference in quality (this would lead to underestimate the inflation). For example, it is not possible to simply compare the price of a particular car with a ‘similar’ one sold five years ago. In the meantime the quality of that car will have changed – the comparison of prices must take account of the quality change. The price statistician must therefore make a quality adjustment – that is, he or she must estimate what part of the total price change between the two cars was really due to a change in the quality of the car and what part is a genuine price change. Sampling: All CPIs are based on the continuous measurement of a sample of prices of specified goods and services. The HICPs must be based on samples sufficient to yield reliable and comparable results, taking into account the national diversity of products and of prices. Furthermore, as products or retail outlets disappear from the market, they need to be replaced with new ones. HICPs are required to be based on up-to-date samples, in particular by banning the practice whereby "missing" prices are simply assumed to be equal to the last observed prices. The HICP will incorporate a new product when it achieves a sales volume of over one part per thousand of total consumers' expenditure covered by the HICP in a Member State. 3.3.2 Other statistical procedures Compilation of European aggregates Index type: Laspeyres-type index Basic formula: There is no unique internationally agreed way of combining sets of detailed price data into a price index number. Different formulas can give significantly different results. The HICPs should be created using either the ratio of arithmetic mean prices or the ratio of geometric mean prices when compiling the elementary aggregates. Other alternative comparable formulas can be used if the resulting index does not differ systematically from an index using the mentioned formulas by more than one tenth of one percentage point on average over one year against the previous year. Chain index: HICPs are aggregated using a chain index formula. The index is computed as an annual chain-index allowing for country weights changing each year. The weight of each Member State is its proportion of final consumption expenditure of households in the EU total (HFCME). Country weights for the EICP and EEAICP are derived from the value of HFMCE in national currencies (including the euro for the euro area) converted into purchasing power standards (PPS). The "country weight" reflects its share in respectively the euro area, the EU and EEA totals. Weights assigned to each sub-index vary from country to country, depending on the relative importance of consumers' expenditure on each sub-category in each country. The European Index of Consumer Prices (EICP) is a weighted average of HICPs from EU Member States. Starting in 1999, the Monetary Union Index of Consumer prices (MUICP) is treated as a single entity within the EICP. The MUICP is calculated as a weighted average of the euro area regardless of its composition. The European Economic Area Index of Consumer Prices (EEAICP) further includes Iceland and Norway. Adjustments No seasonal adjustments are made. For adjustments for quality change, please see above. Reference period see "Base period" Base period Time coverage of HICPs starts from 1996. Historical time series of some MSs national CPIs are available back to the 1960s. HICPs are produced and published using a common index reference period (2005=100), but national Consumer Price Indices (CPIs) may still be published according to national need and definitions (see also base page – time coverage). HICPs are produced on a monthly basis (index levels, annual and monthly rates as well as annual average rates). HICP weights are updated once a year taking effect in January of each year. OTHER ASPECTS Greece is linked into the MUICP starting with the January 2001 index. The annual rate of change for the MUICP of each current month in 2001 is the change from the corresponding month in 2000 to December 2000 for the eleven euro area countries combined with the change from December 2000 to the current month of 2001 for the twelve euro area countries. In other words, the euro area is treated as an entity regardless of its composition. For analytical purposes Eurostat has made available historical series covering the current twelve Member States of the euro area. 10 new MSs are linked into EICP from April 2004. Since HICPs are aggregated using a chain index formula, the new Member States are integrated into the EICP without any computational problems. Starting from May 2004, the weighted changes in the Member State’s index levels since April 2004 are linked to the corresponding EICP index in April 2004. This means that the annual rate of change for the all-items index in, for example, May 2004 is the change from May 2003 to April 2004 (covering the 15 old Member States) combined with the change from April 2004 to May 2004 (of the 25 Member States). As a matter of principle, the HICPs for the 10 new Member States is compliant with the HICP Regulatory framework since May 2004. In practice, their methodology has gradually improved for more than 5-7 years so that data for the last couple of years should be considered as virtually compliant for most of the new Member States. Special warnings · Those few indices which became obsolete before 2005 retain their original reference year (1996=100). · The method used by the UK to re-reference to 2005=100 is different from that used by all other EU and EEA countries in that the UK has used unrounded index levels for rescaling and computed inflation rates from the unrounded re-referenced index series.
3.4.1 Validation of intermediate results Compilation of European aggregates Validation of statistical data Data validation is done by National Statistical Institutes; additional quality checks are carried out also by Eurostat. |
| VI. Other Aspects |
| Footnotes | ||
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