HICP
FAQs on the European Union measure of inflation
What is the harmonised index of consumer prices? The harmonised index of consumer prices (HICP) is an internationally comparable measure of inflation calculated by each Member State of the European Union (EU). HICPs are used to compare inflation rates across the European Union. The UK HICP has been known as the Consumer Prices Index (CPI) since 10 December 2003. (For further details see “Guide to: CPI”.)
Since January 1999, HICPs have been used by the European Central Bank (ECB) as the target measure of inflation for the Eurozone, which comprises of the following 12 Member States: Austria, Belguim, Finland, France, Germany, Greece, Irish Republic, Italy, Luxembourg, Netherlands, Portugal, and Spain. Increasingly, HICPs are being used for indexing contracts which cover more than one EU Member State.
Why was the HICP developed? National consumer price indices within Europe, such as the Retail Prices Index (RPI), vary considerably in terms of their coverage of goods and services and in the rules underlying their construction. This can impact on the measured rates of inflation. In response to this, and as a requirement of the Maastricht Treaty, Eurostat - the statistical office of the European Union - in conjunction with the National Statistical Offices of EU Member States, developed the HICP as a comparable measure of inflation. In May 2004 the European Union was extended from 15 Member States (the 12 in the Eurozone plus Denmark, Sweden and UK) to 25, with the addition of the following 10 countries; Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. HICP inflation rates for all Member States are available from January 1997.
For how long has the HICP been produced? The official index started in January 1996 with the first official annual rate being available in January 1997. The index base of the Official index is average 1996 = 100. Estimates for the UK HICP prior to this date have been made back to 1988, with indicative figures available for 1975 to 1987. Details can be found in an article under CPI/HICP methodology and articles.
Is the HICP revisable? Unlike the RPI, the HICP is revisable, but only in the following circumstances:
- if the figure is originally published as provisional
- if mistake is found in either the basic data or in the calculation of the HICP, and
- subject to approval by Eurostat, if new or improved basic information become available which are considered necessary in order to improve the accuracy of an HICP.
How is the HICP defined? The HICP is defined in a series of legally binding regulations. The Council Regulation (EC) No 2494/95 of 23 October 1995 'concerning harmonised indices of consumer prices' provides the legal basis of the HICPs' and a series of subsequent Council and Commission Regulations define the construction and coverage of the HICP.
The aim of these regulations is to establish a set of minimum standards which ensure that HICPs constructed in Member States produce comparable indices. They aim to promote good statistical practice through defining a series of 'Minimum Standards' recognising the principle of 'subsidiarity' to allow for national circumstances.
HICP Regulations are drafted by the European Commission (Eurostat) in conjunction with Member States through the HICP Working Party. This work is overseen and approved by the Statistical Program Committee (SPC) which comprises Heads of EU National Statistical Institutes (NSI), including the UK National Statistician, and the Head of Eurostat. While the UK can influence legislation, we cannot dictate it.
As the HICP is the measure of inflation used by the ECB for monitoring inflation in the Eurozone, the 'opinion' of the European Central Bank is also sought on all regulations.
Are HICP Regulations obligatory in all EU countries? Yes. Eurostat on behalf of the Commission undertakes an ongoing compliance monitoring program to evaluate compliance to the HICP Regulations.
What are the governance arrangements of the HICP? There is no formal 'governance' body for the HICP. However, Member States interests are represented at the HICP Working Party, which meets about three times a year. In addition, the HICP regulations normally require a 'qualified majority' [vote] before they can become law.
Where can I find out more about the development of the HICP? Articles originally published in Economic Trends on the development of HICP are available on the website under CPI & HICP methodology and articles.
printer-friendly
For HICP, see Consumer Price Indices Press Release