Jarko PASANEN Unit D-4: Price Statistics jarko.pasanen@ec.europa.eu

1. Workshop: "Problems in measuring inflation" Skopje, 22 May 2007HICP, past achievements and future challenges Jarko PASANEN Unit D-4: Price Statistics jarko.pasanen@ec.europa.eu HICP

2. 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 HICP

3. 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 HICP

4. 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 HICP

5. Initial implementing measures (1749/1996) • Sub-indices (2214/1996) • Weights (2454/1997) • Coverage of goods and services (1687/1998) • Geographic and population coverage (1688/1998) • Treatment of tariffs (2646/1998) • Treatment of insurance (1617/1999) • Revised sub-indices (1749/1999) • Treatment of products in the health, education and social protection sectors (2166/1999) • Timing of entering purchaser prices (2601/2000) • Treatment of price reductions (2602/2000) • Treatment of service charges (1920/2001 and corrigenda) • Minimum standards for revisions (1921/2001 and corrigenda) • Common index reference period (1708/2005) • Temporal coverage of price collection (701/2006) HICP

6. 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 HICP

7. 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 HICP

8. 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 HICP

9. PRIORITIES AND FUTURE WORK, cont’d • Treatment of seasonal products • Development of the COICOP/HICP classification • Consolidation and codification of the HICP legal framework HICP

10. 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 HICP

11. Some remarks • HICP legislation is a part of Acquis • But HICP data required even before accession • Better implement as soon as possible • Take full advantage of Twinning • Regulations are guidance in form of legislation • Emphasis 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 HICP • HICP can be largely based on CPI • Eurostat will provide advice and assistance HICP

12. FURTHER INFORMATION HICP dedicated section on Eurostat’s website: • http://ec.europa.eu/eurostat special topics  HICP HICP