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An HICP for the United States. Comparing inflation between United States and Europe Using the Methods of the European Union’s Harmonized Index of Consumer Prices Walter Lane and Mary Lynn Schmidt U.S. Bureau of Labor Statistics. Acknowledgements. The authors wish to thank :

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an hicp for the united states

An HICP for the United States

Comparing inflation between United States and Europe Using the Methods of the European Union’s Harmonized Index of Consumer Prices

Walter Lane and Mary Lynn Schmidt

U.S. Bureau of Labor Statistics

acknowledgements
Acknowledgements

The authors wish to thank :

  • John Greenlees for his critical review
  • Rob Cage, Joshua Klick and Cam Taylor for providing the expenditure weights
  • Lyubov Rozenthal for performing the index calculations
  • Susan Fleck, Mary Jablonski, Ronald Johnson, John Layng, Wodolar Lysko and Jessica Sincavage for editing.

The results remain the responsibility of the authors and not the Bureau of Labor Statistics.

slide3
Data
  • US HICP\\CPISRV3\Dcppi\Harmonized_Index_of_Consumer_Prices_&_Foreign_CPIs
  • EU HICP
  • http://epp.eurostat.cec.eu.int/portal/page?_pageid=0,1136173,0_45570701&_dad=portal&_schema=PORTAL
experimental bls series
“Experimental” BLS series
  • As opposed to “official” series
  • Produced outside regular production systems
  • Less than full production quality
  • Not produced until after the publication of corresponding official statistics
    • For security reasons
why hicp
Why HICP ?

International comparability

  • Inflation rates
  • Deflated series

National CPIs OK for domestic purposes

  • Indexation of payments

Visit to EUROSTAT in 2002

  • John Astin, then head of consumer prices
  • HICP Manual
an experimental consumer price index for the united states
An Experimental Consumer Price Index for the United States
  • January 1998 forward
  • follows HICP methods to the extent possible
  • includes the rural population
    • expanded the CPI’s population coverage to the whole population
  • excludes owner-occupied housing
    • narrowed the CPI’s item coverage to remove owner-occupied housing
  • “experimental” vs. “official” BLS Statistics
    • produced outside of its regular production system
    • less than full production quality
    • after the publication of the corresponding official statistics
    • available from the authors on request
european union
Until April 2004:

The“EU15”:

Austria

Belgium

Denmark

Germany

Greece

Finland

France

Ireland

Italy

Luxembourg

the Netherlands

Portugal

Spain

Sweden

the United Kingdom.

On May 1, 2004ten additional countries

The “EU25”:

Cyprus

the Czech Republic

Estonia

Hungary

Latvia

Lithuania

Malta

Poland

Slovakia

Slovenia

European Union
european monetary union emu
European Monetary Union (EMU)
  • The “Euro-zone,”
  • EU15 except
    • Denmark
    • Sweden
    • the United Kingdom
  • Between 2006 and 2010:The 10 countries that joined in 2004 will
    • join the EMU
    • adopt the Euro
  • The European Central Bank (ECB)
    • Manages the Euro
    • Uses the HICP
cpi u
CPI-U
  • Official U.S. CPI
  • CPI for All Urban Consumers
  • 87 % of the US population
    • Metropolitan areas
    • Small urban places (“Micropolitan areas”)
  • Excludes
    • Rural: 11 % of U.S. population
    • Institutional population: 2 %
      • Prisoners
      • Nursing home residents
      • Military living on bases
cpi xr
CPI-XR
  • Experimental index for the (non-institutional)ruralpopulation
  • Jan 02 onward
  • 13 % of the US pop
  • 11 % of spending
  • Weights
    • from Consumer Expenditure Surveys
    • for rural population
  • Price movement
    • from small urban areas
cpi xt
CPI-XT
  • Experimental index for (non-institutional)totalpopulation
  • Jan 02 onward
  • 98 % of the US population

CPI-XT = CPI-U + CPI-XR

us hicp
US HICP
  • Removed weights for:
    • Owners’ equivalent rent of primary residence
    • Owners’ equivalent rent of secondary residences(part of the Lodging while out of town stratum)
  • Restored the weights of
    • Home maintenance and repairs
    • appliance purchases and repairs
other differences between european and us methods
Other Differences Between European and US Methods
  • geometric formula for most US elementary aggregates
    • tends to rise more slowly than Dutot(HICP allows either Dutot or Jevons formula)
  • quality adjustments for changes in consumer products
  • introduce new products
  • differences in the public/private divide
    • Medical care
    • Education

Have much larger importance in the US indexes

  • Household and vehicle insurance
    • Europe: premiums-net-of-reimbursements
    • US: gross premiums (net reimbursements from expenditures)
slide17
Harmonized index of consumer prices for selected countries and areas,
  • percent change from same period of previous year, 2003-2006
  • -------------------------------------------------------------------------------------------------------------
  • United European European United
  • Period States Japan Union-25 Union-15 France Germany Italy Kingdom
  • (1) (2) (3)
  • -------------------------------------------------------------------------------------------------------------
  • 2003 2.3 -0.3 1.9 2.0 2.2 1.0 2.8 1.4
  • 2004 2.8 0.0 2.1 2.0 2.3 1.8 2.2 1.3
  • I 1.7 -0.1 1.7 1.7 2.0 1.0 2.3 1.3
  • II 3.0 -0.4 2.3 2.3 2.6 1.9 2.3 1.4
  • III 2.8 -0.1 2.3 2.3 2.4 2.0 2.3 1.3
  • IV 3.7 0.6 2.3 2.3 2.3 2.2 2.2 1.4
  • 2005 3.9 -0.4 2.2 2.1 1.9 1.9 2.2 2.0
  • I 3.2 -0.1 2.1 2.1 1.9 1.7 2.0 1.7
  • II 3.3 -0.1 2.0 2.0 1.8 1.6 2.2 1.9
  • III 4.6 -0.4 2.3 2.3 2.1 2.1 2.2 2.4
  • IV 4.3 -0.8 2.3 2.3 1.8 2.2 2.4 2.1
  • Sep 5.9 -0.5 2.5 2.5 2.4 2.5 2.2 2.4
  • Oct 5.3 -0.9 2.4 2.4 2.0 2.3 2.6 2.3
  • Nov 3.9 -1.0 2.3 2.3 1.8 2.2 2.4 2.1
  • Dec 3.8 -0.4 2.1 2.2 1.8 2.1 2.1 1.9
  • 2006
  • Jan 4.5 0.5 2.2ep 2.3ep 2.3 2.1 2.2 1.9
  • Feb 4.0 0.4 2.2ep 2.2ep 2.0 2.1 2.2
  • ------------------------------------------------------------------------------------------------
  • e: estimated p: provisional
  • (1) The figures for Japan refer to the CPI which covers the entire country. They are adjusted to exclude owner-occupied housing.
  • (2) European Union-25 (EU-25) refers to European Union memeber countries as of May 1, 2004. The EU-25 index is the household expediture-weighted average for Austria, Belgium, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
  • (3) European Union-15 (EU-15) refers to the European Union members prior to the expansion of the European Union countries on May 1, 2004. The EU-15 index is the household expenditure-weighted average for Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
  • NOTE: These percent changes are based on national harmonized indexes of consumer prices (HICP) as published by each country and Eurostat. The HICP is the standard price index that members of the European Union must produce. The index covers the entire population of a country and excludes owner-occupied housing. The data have not been otherwise adjusted for comparability. National differences exist, for example, with respect to the frequency of market basket weight changes.
  • The BLS uses the term "experimental" for the U.S. HICP to denote that the series is produced outside of regular production systems and, consequently, with less than full production quality.
  • For more information see "Comparing inflation between United States and Europe Using the Methods of the European Union's Harmonized Index of Consumer Prices" by Walter Lane and Mary Lynn Schmidt at <link>
  • PREPARED BY: U.S. Department of Labor, Bureau of Labor Statistics, April 7, 2006.
two digit classification of individual consumption by purpose
01 Food and non-alcoholic beverages

02 Alcoholic beverages, tobacco and narcotics

03 Clothing and footwear

04 Housing, water, electricity, gas and other fuels

05 Furnishings, household equipment and routine maintenance of the house

06 Health

07 Transportation

08 Communication

09 Recreation

10 Education

11 Hotels, cafes and restaurants

12 Miscellaneous goods and services

Two-DigitClassification of IndividualConsumption by Purpose

20

what s in ush12
Legal services

Funeral expenses

Financial services

Motor vehicle insurance

Jewelry and watches

Personal care products

Personal care services

Household paper products

What’s in USH12?

21

compare price change eu25 and us hicp sub indexes dec 98 to 2005
US EU25

All Items 19.2% 16.6%

02 Alcohol and tobacco 38.3% 31.6%

04 Housing 36.9% 27.1%

06 Health 32.7% 27.3%

07 Transportation 21.4% 24.1%

10 Education 50.9% 32.8%

12 Miscellaneous goods 23.0% 30.0%

and services

Compare Price Change, EU25 and US HICP sub indexes, Dec 98 to 2005

24

selected comparisons of two digit indexes
Selected comparisons of two-digit indexes

RI EU25 USH

02 44.8 19.2

RI EU25 USH

04 145.7 134.2

27

selected comparisons of two digit indexes28
Selected comparisons of two-digit indexes

RI EU25 USH

06 38.4 78.5

RI EU25 USH

10 11.1 31.9

28

selected comparisons of two digit indexes29
Selected comparisons of two-digit indexes

RI EU25 USH

07 149.9 202.6

RI EU25 USH

12 86.5 92.2

29

eu25 selected 2 digit indexes dec 1998 2005
EU25 selected 2-digit indexes, Dec 1998-2005

Alcohol and tobacco

Alcohol and tobacco

Transport

30

us hicp 2 digit indexes dec 1997 200533
US HICP 2-digit indexes, Dec 1997-2005

Education

Housing

Transportation

33

background highlights
Classification Of Individual COnsumption by Purpose (COICOP): 2-digit level

US HICP, EU25, and selected countries

Comparison:

All items

Selected Major Groups/Divisions

Expenditure weights /

relative importances

Background highlights

37

background highlights38
Classification Of Individual COnsumption by Purpose (COICOP): 2-digit level

US HICP, EU25, and selected countries

Comparison:

All items

Selected Major Groups/Divisions

Expenditure weights /

relative importances

Background highlights

38

background highlights41
Classification Of Individual COnsumption by Purpose (COICOP): 2-digit level

US HICP, EU25, and selected countries

Comparison:

All items

Selected Major Groups/Divisions

Expenditure weights /

relative importances

Background highlights

41