HICP MoM

HICP MoM is the monthly rate of the Harmonised Index of Consumer Prices for the European Union aggregate. It uses harmonised methods under Regulation 2016/792 so countries can be compared, and it runs since March 1997. Eurostat (the statistical office of the European Union) compiles it from Member State indices produced by National Statistical Institutes under EU rules.

It covers household final monetary consumption expenditure (cash spending by resident and visiting households, excluding residents' spending abroad). Prices are purchaser prices (prices actually paid), taxes included. It is a cost-of-goods index (fixed-basket price tracker), not a cost-of-living index (welfare measure), and it excludes owner-occupied housing. The annual rate (year-on-year change) gets prominence as the inflation gauge.

Prices refer to at least 1 working week at or around mid-month, with more frequent pricing for products with volatile within-month prices. The flash estimate (early snapshot) for the euro area appears at month-end. The full set appears mid-next-month, 15 to 18 days later, both at 11:00 CET.

The flash carries euro-area annual inflation with estimated annual and monthly rates for selected components. The full release adds annual and monthly rates, the weights table (spending shares), component contributions (percentage-point shares) and methods notes. January is delayed to end-February for the weight update. HICPs are generally final at release: provisional data are finalised next month, mistakes are corrected without delay, and flash-to-final change is not a revision.

Headline (all-items index) covers more than 500 sub-indices from 12 ECOICOP divisions (EU product classification), grouped into 4 special aggregates (grouped product sets).

• Food, alcohol and tobacco: captures processed and unprocessed food plus alcohol and tobacco.
• Energy: captures electricity, gas and fuels and is the most volatile driver.
• Non-energy industrial goods: captures manufactured consumer goods excluding energy.
• Services: captures consumer services and is the largest aggregate by weight (spending share).

In October 2022, annual inflation (year-on-year price change) reached 11.5% for the EU and 10.6% for the euro area. Monthly rates were 1.4% and 1.5% respectively. Energy rose 41.5% on the year and 6.2% on the month, with weight 109.3 per mille, contributing 4.44 percentage points of the 10.6 points.

Food, alcohol and tobacco rose 13.1% on the year, services 4.3% and non-energy industrial goods 6.1%. The flash estimate of October 31, 2022 read 10.7% for the euro area, against 10.6% in the final release of November 17, 2022. That gap is not a revision. The lesson is to read the monthly rate and the ex-energy aggregates alongside the annual headline, since one volatile component can dominate.

1. Price collection: Sampled purchaser prices (prices actually paid, taxes included) are observed in a mid-month window of at least 1 working week. Products with volatile within-month prices are priced more often.

1. Elementary index: Each elementary aggregate (smallest product group) gets an unweighted index, usually Jevons (geometric mean of price relatives). A few Member States use Dutot (ratio of average prices); both pass time-reversibility (consistent measurement forward and backward), while Carli fails it.

1. Upper-level aggregation: Higher levels use a Laspeyres-type formula (weighted average with prior-year spending shares price-updated to December). Weights sum to 1000 and are updated every year; aggregation runs on unrounded indices.

1. Annual chain-linking: Each year forms a 13-observation run from December at 100 to next December, then links into a chained index (linked time series). MoM is the chained-index change from the prior month times 100; YoY (year-on-year change) spans 2 weight-years and is chained.

1. Illustrative example: In December, A costs 2.00 with weight 700 in 1000 and B costs 10.00 with weight 300 in 1000; December index is 100. In January, A at 2.02 (relative 1.010) and B at 10.30 (relative 1.030) give 1.016, so the index is 101.6 for a MoM of 1.6%. In February, B falls to 9.90 (relative 0.990) while A is unchanged, so the index is 100.4 and February MoM is minus 1.2%.