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1 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.

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Presentation on theme: "1 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."— Presentation transcript:

1 1 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

2 2 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.

3 3 Data US HICP \\CPISRV3\Dcppi\Harmonized_Index_of_Consu mer_Prices_&_Foreign_CPIs EU HICP =0, ,0_ &_dad=portal&_schema=PO RTAL

4 4 “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

5 5 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

6 6 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

7 7 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, 2004 ten additional countries The “EU25”: Cyprus the Czech Republic Estonia Hungary Latvia Lithuania Malta Poland Slovakia Slovenia

8 8 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

9 9 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

10 10 CPI-XR ruralExperimental index for the (non-institutional) rural population 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

11 11 CPI-XT Experimental index for (non-institutional) total population Jan 02 onward 98 % of the US population CPI-XT = CPI-U + CPI-XR

12 12 U vs. XR vs. XT: Dec 01 to Dec 05

13 13 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

14 14 Biennial Weights (Relative Importances) for CPI-U, CPI-XR, CPI-XT and HICP

15 15 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)

16 16 CPI-U vs. HICP : Dec 97 to Dec 05

17 17 Harmonized index of consumer prices for selected countries and areas, percent change from same period of previous year, United European European United Period States Japan Union-25 Union-15 France Germany Italy Kingdom (1) (2) (3) I II III IV I II III IV Sep Oct Nov Dec Jan ep 2.3ep Feb ep 2.2ep 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, 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, 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 PREPARED BY: U.S. Department of Labor, Bureau of Labor Statistics, April 7, 2006.

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20 20 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-Digit Classification of Individual Consumption by Purpose 20

21 21 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

22 22 Expenditure weights, selected countries, two-digit level 22

23 23 Expenditure weights, selected countries, two- digit level 23 <> eu25GermanySpainFranceItalySwedenUKUS cp cp cp cp cp cp cp cp cp cp cp

24 24 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

25 25 Comparison: all items, selected countries, Dec

26 26 12-month change selected countries, December

27 27 Selected comparisons of two-digit indexes 27 RI EU25 USH RI EU25 USH

28 28 Selected comparisons of two-digit indexes 28 RI EU25 USH RI EU25 USH

29 29 Selected comparisons of two-digit indexes 29 RI EU25 USH RI EU25 USH

30 30 EU25 selected 2-digit indexes, Dec Alcohol and tobacco Transport Alcohol and tobacco

31 31 US HICP selected 2-digit indexes, Dec Education Transportation

32 32 US HICP 2-digit indexes, Dec

33 33 US HICP 2-digit indexes, Dec Transportation Education Housing

34 34 Alcohol and tobacco, selected countries, Dec France US

35 35 Education, selected countries, Dec Sweden US

36 36 Expenditure weights, selected countries, two-digit level 36

37 37 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

38 38 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

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41 41 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

42 42 Expenditure weights, selected countries, two-digit level 42

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45 45 Dec through Dec percent change


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