HICP 1 Workshop: "Problems in measuring inflation" Skopje, 22 May 2007 HICP, past achievements and future challenges Jarko PASANEN Unit D-4: Price Statistics

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 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)

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: special topics HICP