CPI

The EU Harmonised Index of Consumer Prices (HICP) (an inflation gauge) comes from Eurostat (the statistical office of the European Union). It combines national indexes built by national statistics offices under EU law. It covers household cash spending inside each country, including visitors but excluding spending abroad.

The EU aggregate covers all Member States, unlike the euro-area index for euro members only. New members join by chain-linking at accession, and a fixed-composition series supports analysis. It is not a cost-of-living index, its methods can differ from national indexes, and owner housing stays outside.

Prices are collected at least once in one working week around the middle of the reference month. Fast-changing products are collected more often, and scanner data cover the opening weeks. Results usually appear between 15 and 18 days after the end of the reference month. One release in each cycle arrives later for the yearly refresh of spending shares.

A flash estimate for the euro area appears around the close of the reference month. Each release gives annual and monthly rates with component contributions in points. A database with more than 500 sub-indices and more than 30 special aggregates follows. Figures are final and rarely revised, while provisional figures are completed in a later release.

The headline is the annual rate, the monthly rate is secondary, and contributions show the drivers.

Four groups explain most headline moves, and expenditure shares add to 1000 across groups.

• Food including alcohol and tobacco, 211.02: covers all food plus alcohol and tobacco, the most volatile part after energy.

• Energy, 102.09: covers electricity, gas, household and motor fuels, the usual largest driver of headline swings.

• Non-energy industrial goods, 263.43: covers manufactured goods excluding energy, such as clothing and durables.

• Services, 423.47: covers all services, the largest share and usually the most persistent contributor.

A core aggregate excluding energy, food, alcohol and tobacco carries 686.90 on the same scale.

One archived release showed the EU annual rate at 11.5%, up from 10.9%, with a monthly rate of 1.4%. Energy added 4.44 percentage points to the euro-area 10.6%, ahead of food at 2.74, services at 1.82 and goods at 1.62 overall. Energy itself ran at 41.5%, with France at 7.1% and Estonia at 22.5%. Rates rose in 13 states, stood stable in 3 and fell in 11 states.

The euro-area flash stood at 10.7% and finalised at 10.6%, a gap that is not a revision.

1. Elementary indices: local prices feed lowest-level averages through fixed formulas that never rewrite chained history.

1. Weights: spending shares come from national accounts for two cycles earlier, updated to the prior cycle.

1. National index: each item price divided by its reference-month price is averaged with price-adjusted shares adding to 1000 in total.

1. EU aggregate: country indexes are unchained, averaged with yearly country weights and chained again. Country weights use data converted with purchasing-power measures.

1. Chaining: each yearly series starts from the reference month at 100 and multiplies onto the long chain.

1. Rates: monthly change divides the index by the adjacent month minus 1 each time. Annual change uses the same month one year earlier minus 1 each time. Contributions: each part drives the monthly move by its own price change times its share. Data are not seasonally adjusted.

A toy example follows the same steps: reference prices of 1.00 and 1.50 with shares of 600 and 400 on the 1000 scale. Later prices of 1.04 and 1.68 give relatives of 1.04 and 1.12, averaging to 1.072 for an index of 107.2 overall. With a chained reference of 115.0, the chained level reaches 123.28 overall. Against 122.10 the monthly rate is 0.97%, and against 112.00 one year earlier the annual rate is 10.07%.