HARMONISED CONSUMER PRICE INDEX Nadiežda Alejeva Head, Price Statistics Division Statistics Lithuania WORKSHOP, 13 JULY 2012, YEREVAN 1

HARMONISED CONSUMER PRICE INDEX CONTENT OF THE PRESENTATION  MAIN POINTS OF THE HARMONISED CONSUMER PRICE INDEX (HICP)  PURPOSES OF THE HICP AND THE NATIONAL CONSUMER PRICE INDEX (CPI)  DIFFERENCES BETWEEN THE CPI AND THE HICP  USAGE OF THE CPI AND THE HICP  CONCLUSION WORKSHOP, 13 JULY 2012, YEREVAN 2

HARMONISED CONSUMER PRICE INDEX HARMONISED CONSUMER PRICE INDICES (HICPs)  HICPs ARE A NEW FAMILY OF CONSUMER PRICE INDICES (CPIs) CALCULATED ACCORDING TO A HARMONISED APPROACH AND REGULATED BY SET OF DEFINITIONS AND REQUIREMENTS.  HARMONISED METHODOLOGY FOR COMPILING HICPs IN EUROPEAN UNION MEMBER STATES (EU MSs) IS BASED ON THE EXPERIENCE AND EXPERTISE OF NATIONAL STATISTICAL INSTITUTES OF EU MSs.  HICPs HARMONISED METHODOLOGY STANDS ON A SOLID LEGAL BASIS THAT PROVIDES A HIGH DEGREE OF COMPARABILITY, RELIABILITY AND TIMELINESS (THERE ARE 19 REGULATIONS AT THE MOMENT).  HARMONISATION TASK IS STILL BEING CONTINUED AS SOME IMPROVEMENTS IN COMPARABILITY OF HICPs ARE NEEDFUL. WORKSHOP, 13 JULY 2012, YEREVAN 3

HARMONISED CONSUMER PRICE INDEX DEFINITIONS OF THE HICP AND THE CPI  THE HICP IS A LASPEYRES-TYPE INDEX MEASURING THE AVERAGE CHANGE IN THE PRICES OF GOODS AND SERVICES AVAILABLE FOR PURCHASE IN THE ECONOMIC TERRITORY OF THE MSs.  THE HICP IS DESCRIBED AS A LASPEYRES-TYPE ‘CONSUMER INFLATION’ OR ‘PURE PRICE’ INDEX MEASURING AVERAGE PRICE CHANGE ON THE BASIS OF THE CHANGED EXPENDITURE OF MAINTAINING THE CONSUMPTION PATTERN OF HOUSEHOLDS AND THE COMPOSITION OF THE CONSUMER POPULATION IN THE REFERENCE (OR BASE) PERIOD.  IN LITHUANIA, THE CPI IS DEFINED AS A RELATIVE INDICATOR REFLECTING THE OVERALL CHANGE IN PRICES FOR CONSUMER GOODS AND SERVICES PURCHASED BY HOUSEHOLDS TO SATISFY THEIR CONSUMPTION NEEDS OVER A CERTAIN PERIOD OF TIME. WORKSHOP, 13 JULY 2012, YEREVAN 4

HARMONISED CONSUMER PRICE INDEX PURPOSES OF HICPs  HICPs PROVIDE THE BEST STATISTICAL BASIS FOR INTERNATIONAL COMPARISONS OF CONSUMER PRICE INFLATION IN THE EUROPEAN PERSPECTIVE.  HICPs ARE THE BASIS FOR COMPILING: THE MONETARY UNION INDEX OF CONSUMER PRICES (MUICP) – EURO AREA (17 EU MSs) INFLATION IS MEASURED; THE EUROPEAN INDEX OF CONSUMER PRICES (EICP) – EUROPEAN UNION (27 EU MSs) INFLATION IS MEASURED; THE EUROPEAN ECONOMIC AREA INDEX OF CONSUMER PRICES (EEAICP) COVERING 27 EU MSs PLUS ICELAND AND NORWAY – EUROPEAN ECONOMIC AREA INFLATION IS MEASURED.  HICPs HAD BEEN ACCEPTED BY THE COMMISSION AND THE EUROPEAN MONETARY INSTITUTE AS PROVIDING SATISFACTORY MEASURES FOR THE ASSESSMENT OF CONVERGENCE.  HICPs ARE USED IN MONETARY POLICY AND THE MONITORING OF INFLATION IN THE ECONOMIC AND MONETARY UNION (EURO AREA).  THE MUICP IS THE KEY INDICATOR FOR THE ASSESSMENT OF PRICE STABILITY FOR THE EUROPEAN SYSTEM OF CENTRAL BANKS AND THE EUROPEAN CENTRAL BANK.  THE HICP SERVES AS A CRITERION FOR ENTERING THE EURO AREA. WORKSHOP, 13 JULY 2012, YEREVAN 5

HARMONISED CONSUMER PRICE INDEX PURPOSES OF THE CPI  THE CPI IS THE MAIN INDICATOR TO MEASURE THE CONSUMER PRICE INFLATION IN THE COUNTRY.  NATIONAL INFLATION INDICATOR IS PRODUCED TO SATISFY THE ECONOMIC AND MONETARY POLICY NEEDS. WORKSHOP, 13 JULY 2012, YEREVAN 6

DIFFERENCES BETWEEN THE CPI AND THE HICP IN LITHUANIA CPIHICP CLASSIFICATION CLASSIFICATION OF INDIVIDUAL CONSUMPTION BY PURPOSE (COICOP) – A REFERENCE CLASSIFICATION AT FOUR- DIGIT LEVEL PUBLISHED BY THE UNITED NATIONS STATISTICS DIVISION CLASSIFICATION OF INDIVIDUAL CONSUMPTION BY PURPOSE ADAPTED TO THE NEEDS OF HICPs THROUGH COMMISSION REGULATION (EC) No 1749/1999 (HICP/COICOP) COVERAGE COVERS GAMES OF CHANCE AND FINANCIAL INTERMEDIATION SERVICES DOES NOT COVER GAMES OF CHANCE AND FINANCIAL INTERMEDIATION SERVICES COVERS CONSUMPTION EXPENDITURE MET ONLY BY THE RESIDENTS OF THE COUNTRY WITHIN THE ECONOMIC TERRITORY OF THE COUNTRY COVERS CONSUMPTION EXPENDITURE BY THE RESIDENTS OF THE COUNTRY, OF INSTITUTIONAL HOUSEHOLDS, NON-RESIDENTS AND VISITORS FROM ABROAD WITHIN THE ECONOMIC TERRITORY OF THE COUNTRY WEIGHTING SYSTEM DUE TO A DIFFERENT COVERAGE OF CONSUMPTION EXPENDITURE, WEIGHTS USED FOR THE HICP AND THE CPI CALCULATION DIFFER; THIS IS THE MAJOR FACTOR LEADING TO THE DIFFERECES IN THE CPI AND THE HICP VALUES WEIGHTS ARE EXPRESSED IN PER CENT WEIGHTS ARE EXPRESSED IN PER MILLE WORKSHOP, 13 JULY 2012, YEREVAN 7 HARMONISED CONSUMER PRICE INDEX

COMPARISON OF INFLATION RATES CALCULATED BASED ON THE CPI AND THE HICP IN LITHUANIA 12-MONTHS AVERAGE INFLATION RATES, % YEAR 2011YEAR 2012 M01M02M03M04M05M06M07M08M09M10M11M12M01M02M03M04M05 CPI1,61,92,22,62,93,23,53,73,94,04,24,14,2 4,13,9 HICP1,51,82,12,52,83,23,43,63,84,04,1 4,2 4,13,9 DIFFERENCE (CPI–HICP) 0,1 0,00,1 0,00,10,0 WORKSHOP, 13 JULY 2012, YEREVAN 8 HARMONISED CONSUMER PRICE INDEX A 12-months average rate is obtained by comparing the average CPI/HICP in the latest 12 months to the average of the previous 12 months.

HARMONISED CONSUMER PRICE INDEX THE CPI AND THE HICP USAGE IN LITHUANIA  THE CPI IS MAINLY USED : FOR INDEXATION PURPOSES; AS A DEFLATOR BY NATIONAL ACCOUNTS AND OTHER FIELDS OF STATISTICS; FOR RESEARCH AND ANALYTICAL PURPOSES; FOR PLANNING AND FORECASTING.  THE HICP IS MAINLY USED: BY POLICY MAKERS, ECONOMIC AND FINANCIAL ANALYSTS; FOR THE MONITORING OF PRICE STABILITY AND PREPARATION OF THE CONVERGENCE REPORTS; FOR FORECASTING; FOR INDEXATION PURPOSES ACCORDING TO THE CONTRACTS; TO FACILITATE INTERNATIONAL COMPARISON OF CONSUMER PRICE INFLATION. WORKSHOP, 13 JULY 2012, YEREVAN 9

CONCLUSION  CPIs COMPILATION CONSISTS OF COLLECTING AND PROCESSING PRICE AND EXPENDITURE DATA ACCORDING TO THE SPECIFIED CONCEPTS, DEFINITIONS, METHODS AND PRACTICES. CONCEPTS RELATE TO THE ESSENTIAL AIMS OF THE CPI IN THE COUNTRY.  HICPs ARE DESIGNED MAINLY TO PROVIDE A RELEVANT AND COMPARABLE MEASURE OF INFLATION AND CONVERGENCE IN THE EU, PARTICULARLY IN THE CONTEXT OF THE MONETARY POLICY IN THE EURO AREA. THEY ARE USED FOR CROSS-COUNTRY ANALYSIS AND COMPARISONS.  IN PRACTICE, THERE ARE SIGNIFICANT OVERLAPS BETWEEN HICPs AND CPIs. THEY ARE MAINLY BASED ON THE SAME DATA SOURCES, BUT THEY MEASURE INFLATION FOR DIFFERENT AIMS AND THEREFORE, THERE ARE SOME DIFFERENCES IN CONCEPTS AND METHODS BETWEEN THEM.  HICPs ARE NOT INTENDED TO REPLACE NATIONAL CPIs. MANY MSs CONTINUE TO COMPILE THEIR CPIs FOR DOMESTIC PURPOSES, SUCH AS INDEXATION OR WAGE BARGAINING. IN SOME MSs THERE ARE LEGAL OR INSTITUTIONAL BARRIERS FOR USING INDICES OTHER THAN THE NATIONAL CPIs.  METHODOLOGICAL OR TECHNICAL IMPROVEMENTS INTRODUCED FOR HICPs MAY BE ALSO INCORPORATED INTO NATIONAL CPIs. IT CAN LEAD TO BETTER QUALITY AND COMPARABILITY OF THE CPI. WORKSHOP, 13 JULY 2012, YEREVAN 10 HARMONISED CONSUMER PRICE INDEX