1. Doc.A6465/14/12
Ag Joint Index
Working Group on Article 64 and Article 65 of the Staff Regulations
Meeting in Luxembourg 24th & 25th March 2014

2. Content of this presentation
Test calculations of new Joint Index
Influence of aggregation
Influence of staff distribution

3. Staff Regulations – Annex XI
Eurostat shall, in agreement with national statistical institutes […] calculate the economic parities which establish the equivalence of purchasing power […] The economic parities shall be calculated in such a way that each basic component can be updated twice per year […]. Eurostat shall update the economic parities using the change in the Harmonised Index of Consumer Prices of the Member States and the most appropriate indices as defined by the Working Group on Articles 64 and 65 of the Staff Regulations referred to in Article 13.

4. Staff Regulations – Annex XI
Eurostat shall draw up an index to measure changes in the cost of living for officials of the Union in Belgium and Luxembourg. That index (hereinafter the ‘Joint Index’) shall be calculated by weighting national inflation (as measured by the Harmonised Indices of Consumer Prices (HICP) in the case of Belgium and the Consumer Prices Index (CPI) in the case of Luxembourg) between June of the previous year and June of the current year according to the distribution of the staff serving in those Member States.

5. Different approaches are possible… …so some test calculations here
For information only: assess impact of choice of LU HICP versus LU CPI
Decision 1: evaluate how to calculate the index movement weighted by staff numbers
Decision 2: evaluate appropriate level of aggregation
Apply consumption patterns from BH level
Use overall index values

6. Influence of Staff numbers
What-if calculation
Necessary amount of changes in relative staff numbers BXL : LUX to have an influence on results
Tests done using the overall numbers of BE HICP and LU CPI

7. Data for test calculations
Tests done with index values of 2012 and 2013
2012m06
2013m06
change
LU CPI
118.23
120.67
+2.064%
BE HICP
118.06
119.86
+1.525%
Joint
118.10
???
Staff distribution in 2012: 21.7 : 78.3

8. Results if 2013 staff vary LU : BE staff in 2013 Joint 2013 % change
21.7 : 78.3 (ie. same as 2012)
120.04
1.6 (1.64)
10.0 : 90.0
119.94
1.6 (1.56)
8.3 : 91.7
119.93
1.5
24.1 : 75.9
120.06
1.7

9. Results (if weights applied to mvmt)
LU : BE staff
% change
21.7 : 78.3
1.6 (1.64)
10.0 : 90.0
1.6 (1.58)
4.6 : 95.4
1.5 (1.54)
23.2 : 76.8
1.7 (1.65)

10. Summary
Realistic changes in staff numbers seem unlikely to influence results
Proposal: Eurostat to calculate Joint Index variation t0 to t1 using
BE HICP & LU CPI at t0 weighted by staff at t0
BE HICP & LU CPI at t1 weighted by staff at t1
variation = 100 x ( BELU t1 – BELU t0 ) / BELU t0

11. Overall calculation – HICP & CPI
BE HICP and LU CPI with their respective all- items value and weighted by staff distribution
→ Index values:
2012:
2013:
→ Change: 1.64%

12. Overall calculation – 2x HICP
BE HICP and LU HICP with their respective all- items value and weighted by staff distribution
→ Index values:
2012:
2013:
→ Change: 1.63%

13. Subindex aggregation – BE HICP & LUX CPI
BE HICP and LU CPI, weighted with staff distribution and aggregated using expats' consumption patterns (SHE 2009)
→Index values:
2012:
2013:
→Change: 1.61%

14. Subindex aggregation – 2x HICP
BE HICP and LU HICP, weighted with staff distribution and aggregated using expats' consumption patterns (SHE 2009)
→Index values:
2012:
2013:
→Change: 1.61%

15. Summary: 2012 – 2013 HICP & CPI HICP & HICP Aggregation 1.61% Overall
1.64%
1.63%
Summary: yes, it makes a (small) difference!

16. For comparison: 2011 – 2012 HICP & CPI HICP & HICP Aggregation 2.15%
Overall
2.11%
2.13%

17. Implications?
Previously, there was consistency in calculating CC and monitoring BXL inflation for Ann.Adj.
Reg.1023/2013 does not specify level of aggregation … can be read to imply overall calculation for Ann.Adj. … but aggregation is essential for CC
→ Proposal: Eurostat to use HICP & CPI with individual aggregation for both CC and REM purposes