Euro zone inflation

This page is about inflation in the euro zone (not the EU, since only the euro zone has a common monetary policy). The main question, of course, is price stability.

As long as inflation remains fairly stable, this page will be updated only occasionally.

29 Apr 2013.

Inflation remains under control, with headline inflation at 1.7% in March, and core at 1.6%.

29 Apr 2013. Data through Mar 2013.

Background:

• The HICP, “Harmonized Index of Consumer Prices” are intended to give comparable measures of inflation across the EU, based on similar methodology (but not a common basket of goods)
• Quality adjustments are included, and these measures are explicitly not intended as cost of living measures
• The cost of shelter for owner-occupiers is not included
• MUICP, central to monetary policy, is another name for the HICP for the euro zone

There are many variants. We cover the two that get top billing from the ECB:

• All items: “Euro area (changing composition) - HICP - Overall index, Annual rate of change, Eurostat, Neither seasonally nor working day adjusted”
• Core: The same, but excluding energy and unprocessed foods

Eurostat publishes an early flash estimate for MUICP, which is not covered.

• ECB Statistical Data Warehouse for data 1991-present
• Summary backgrounder
• Compendium of reference documents
• Eurostat, for press releases and a one year data history
• Release calendar

Recent commentary:

• Euro zone core inflation remains steady at about 2 percent
• Euro zone inflation stable
• Inflation moderate and stable in Europe
• Euro zone inflation remains modest
• Euro zone inflation remains under 2 percent

Mar 2004. EC backgrounder.

http://circa.europa.eu/Public/irc/dsis/hiocp/library?l=/public/short_guide_users&vm=detailed&sb=Title

“Harmonized Indices of Consumer Prices (HICPs): A Short Guide for Users”

“The HICPs are a set of EU Consumer Price Indices calculated according to a harmonised approach and a single set of definitions. The key HICPs are:

• The Monetary Union Index of Consumer Prices (MUICP) – aggregate indices covering the countries within the euro-zone.
• The European Index of Consumer Prices (EICP) – for the euro-zone plus the other EU countries.
• The national HICPs – for each of the EU Member States. …

Eurostat also publishes each month a ‘flash estimate’ for the MUICP. This flash estimate is based on the results from the first countries to publish their national estimates and on energy price data. It gives an early indication of what the MUICP is likely to show when the full data set is available. …

Conceptually the HICPs are ‘Laspeyres-type price indices’ rather than ‘cost of living indices’, this reflecting their key role in measuring price stability. Thus the HICPs can be viewed as measuring, broadly, the prices of a fixed expenditure pattern – rather than as being founded on economic concepts of consumer utility. The conceptual differences between the two types of price indices do not generally lead to substantial differences of practice, but for more detailed information on this subject some references are given at the end of this guide. …

The differences between HICPs and individual national (CPIs) can sometimes be significant in practice. The differences have in general been diminishing, although national CPIs use their own national methodologies. In many countries national CPIs were set up to serve different purposes, for example as ‘cost of living indices’ or ‘compensation indices’, and some of the underlying concepts and methods of national CPIs are inappropriate for the HICPs as a ‘pure’ inflation measure (of the impact of inflation on purchasing power). …

In the HICPs, the imputed prices for the services provided by owner-occupied housing are currently excluded. However, an index based on housing acquisition costs is being piloted for possible inclusion in future. It will be compiled separately from the HICPs on an experimental basis before any decision is made to incorporate it within the HICPs. National CPIs use a variety of methods – for example some use an approach involving imputed rents, some include mortgage interest in their CPI, while others entirely exclude the shelter costs of owner- occupiers. …

The need for quality adjustment arises because the nature of the goods and services on the market changes over time. …

In reality the distribution of purchases of goods and services, and the precise nature of some of the goods and services themselves, varies from country to country – there is no uniform basket applying to all countries. The HICPs reflect this reality by being based on the prices and expenditures which are representative in each country and not on an average ‘euro- basket’.”

Jul 2005. Federal Reserve policy report.

http://www.federalreserve.gov/boarddocs/hh/2005/july/ReportSection2.htm

“Monetary Policy Report submitted to the Congress on July 20, 2005”

“The European Central Bank's measure of core inflation, which excludes energy and unprocessed foods, has eased since January to an annual rate comfortably below 2 percent.”