- Belgium's inflation rate based on the European harmonised index of consumer prices (HICP) was running at 1.4 % in July compared to 2.6 % in June. The sharp decrease in inflation for the HICP is due to last year's shift of the sales from July to August.
- Core inflation (inflation without energy and unprocessed food) amounts to -0.5% in July compared to 1.2% in June.
- The inflation rate based on the consumer price index (CPI) for July stood at 2.3% compared to 1.6% in June.
- The sub-indices with the largest upward effect on inflation were gas, electricity, domestic heating oil, motor fuels, tobacco, restaurants and cafés and the purchase of passenger vehicles.
- The sub-indices with the largest downward effect on inflation this month were clothing, accommodation, footwear, fruit, household appliances, vegetables audio and video equipment.
- The harmonised index of consumer prices of July for the EU Member States will be published by Eurostat on 18 August.
Inflation based on the European harmonised index of consumer prices (HICP)[1] was running at 1.4% in July, compared to 2.6% in June. The sharp decrease in inflation for the HICP is due to last year's shift of the sales from July to August. To determine the inflation rate, July 2021 (a sales month) is compared to July 2020 (a month without sales). The inflation rate based on the harmonised index of consumer prices at constant tax rates (HICP-CT)[2] was running at 1.1% in July compared to 2.7% in June. The difference in inflation between the HICP and the HICP-CT is largely due to the changes in excise duties on tobacco and the temporary VAT reduction in the ‘horeca’ sector. These price changes are not taken into account in the HICP-CT.
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Inflation and effect on inflation for the 12 main groups
Based on the breakdown into 12 main groups, the highest inflation rate in July was measured for ‘Housing, water, energy’ (10.7%). The lowest inflation rate was measured for “Clothing and footwear” (-21.6%).
The main group with the largest upward effect on inflation in July was ‘Housing, water, energy’ with an effect on inflation of 1.8 percentage points. The largest downward effect was measured for “Clothing and footwear” with -1.3 percentage points.
Inflation[3] and effect[4] on inflation for the overall HICP and 12 main groups
| Product group | Weight (‰) | Inflation on annual basis (%) | Effect on inflation (percentage point) | ||||||
|---|---|---|---|---|---|---|---|---|---|
| HICP | HICP-CT | ||||||||
| May/21 | Jun/21 | Jul/21 | Jul/21 | May/21 | Jun/21 | Jul/21 | |||
| 0 | Total expenditure | 1.000 | 2.5 | 2.6 | 1.4 | 1.1 | |||
| 1 | Food and non-alcoholic beverages | 180.8 | -1.5 | -1.2 | -1.1 | -1.1 | -0.8 | -0.8 | -0.5 |
| 2 | Alcoholic beverages and tobacco | 53.6 | 5.6 | 5.8 | 6.2 | -0.4 | 0.2 | 0.2 | 0.3 |
| 3 | Clothing and footwear | 52.3 | 0.5 | 0.4 | -21.6 | -21.6 | -0.1 | -0.1 | -1.3 |
| 4 | Housing, water and energy | 172.0 | 7.9 | 8.6 | 10.7 | 10.7 | 1.0 | 1.2 | 1.8 |
| 5 | Interior decoration and household appliances | 82.3 | 0.3 | 0.4 | -1.2 | -1.2 | -0.2 | -0.2 | -0.2 |
| 6 | Health | 78.8 | -0.4 | -0.4 | 0.5 | 0.5 | -0.3 | -0.3 | -0.1 |
| 7 | Transport | 116.0 | 6.7 | 5.6 | 5.1 | 5.0 | 0.6 | 0.4 | 0.5 |
| 8 | Communication | 33.0 | 1.3 | 0.3 | 0.0 | 0.0 | 0.0 | -0.1 | 0.0 |
| 9 | Recreation and culture | 81.9 | 0.7 | 0.4 | -0.4 | -0.4 | -0.2 | -0.2 | -0.2 |
| 10 | Education | 5.3 | 0.6 | 0.6 | 0.6 | 0.6 | 0.0 | 0.0 | 0.0 |
| 11 | Hotels, cafés and restaurants | 60.7 | 2.0 | 2.7 | 1.2 | 2.7 | 0.0 | 0.0 | -0.1 |
| 12 | Various goods and services | 83.3 | 1.3 | 1.4 | 1.2 | 1.2 | -0.1 | -0.1 | 0.0 |
Inflation according to specific aggregates
The overall HICP can be broken down into five specific aggregates which together form the total expenditure.
- Inflation for energy products increased compared to the previous month. It was running at 22.1% in July compared to 18.8% in June and 19.8% in May. Prices increased on average by 4.5% compared to the previous month. The average inflation rate of this aggregate for the last twelve months is 2.1%.
- Inflation for processed food products increased compared to the previous month. It was running at 1.6% in July compared to 1.4% in June.
- Inflation for unprocessed food (fruit, vegetables, meat and fish) has slightly gone down. It was running at -3.6% in July compared to -3.5% in June and -3.3% in May. Prices decreased on average by 1.2% compared to June. The average inflation rate of this aggregate for the last twelve months is 0.7%.
- Inflation for non-energy industrial goods was running at -4.3% in July compared to 0.4% in June and May. Prices decreased by 4.8% on average compared to the previous month, due to the summer sales.
- Inflation for services (including rents) amounted to 1.0% in July. This is a decrease compared to June and May, where the inflation amounted to 1.6%. Prices increased on average by 0.8% compared to the previous month.
Core inflation (inflation without energy and unprocessed food) was running at -0.5% in July, a decrease compared to 1.2% in June. Average core inflation over the last 12 months amounts to 0.9%. Prices of this sub-aggregate decreased by 1.1% compared to the previous month, mainly due to the summer sales period.
Inflation according to specific aggregates
| Specific aggregates | Weight (‰) | Inflation on annual basis (%) | 12-month average (%) | Monthly change | ||
|---|---|---|---|---|---|---|
| May/21 | Jun/21 | Jul/21 | Jul/21 | Jul/21 | ||
| Total expenditure | 1000.0 | 2.5 | 2.6 | 1.4 | 1.0 | -0.5 |
| Fuels and energy sources | 95.6 | 19.8 | 18.8 | 22.1 | 2.1 | 4.5 |
| Processed food products | 187.2 | 1.0 | 1.4 | 1.6 | 1.6 | 0.6 |
| Unprocessed food | 47.2 | -3.3 | -3.5 | -3.6 | 0.7 | -1.2 |
| Non-energy industrial goods | 276.9 | 0.4 | 0.4 | -4.3 | -0.4 | -4.8 |
| Services | 393.0 | 1.6 | 1.6 | 1.0 | 1.5 | 0.8 |
| HICP without energy and unprocessed food (core inflation) | 857.2 | 1.1 | 1.2 | -0.5 | 0.9 | -1.1 |
Effect of sub-indices on inflation
The largest upward effect on inflation was caused by gas (0.56 percentage points). Electricity provided an upward effect of 0.49 percentage points. Domestic heating oil provided an effect of 0.46 percentage points. Motor fuels provided a positive impact of 0.43 percentage points. Tobacco provided an upward effect of 0.30 percentage points. Furthermore, restaurants and cafés and the purchase of passenger vehicles had an impact of 0.12 and 0.08 percentage points, respectively.
Sub-indices with the largest upward effect on inflation
| Sub-index | Weight (‰) | Effect on inflation (percentage point) | |
|---|---|---|---|
| 2021 | Jul/21 | ||
| 04.5.2 | Gas | 17.1 | 0.56 |
| 04.5.1 | Electricity | 35.8 | 0.49 |
| 04.5.3 | Domestic heating oil | 12.2 | 0.46 |
| 07.2.2 | Motor fuels | 29.6 | 0.43 |
| 02.2.0 | Tobacco | 35.0 | 0.30 |
| 11.1.1 | Restaurants and cafés | 52.9 | 0.12 |
| 07.1.1 | Purchase of passenger vehicles | 36.8 | 0.08 |
The largest downward effect on inflation came from clothing (-1.05 percentage points). Accommodation provided an effect of -0.20 percentage points. Footwear had a negative impact of -0.17 percentage points. Fruit had a negative impact of -0.13 percentage points. Household appliances had a negative effect of -0.09 percentage points. Finally, vegetables and audio and video equipment had a negative impact of -0.08 and -0.07 percentage points, respectively.
Sub-indices with the largest downward effect on inflation
| Sub-index | Weight (‰) | Effect on inflation (percentage point) | |
|---|---|---|---|
| 2021 | Jul/21 | ||
| 03.1.2 | Clothing | 40.2 | -1.05 |
| 11.2.0 | Accommodation | 5.3 | -0.20 |
| 03.2.0 | Footwear | 8.3 | -0.17 |
| 01.1.6 | Fruit | 12.5 | -0.13 |
| 05.3.1 | Household appliances | 11.1 | -0.09 |
| 01.1.7 | Vegetables | 17.5 | -0.08 |
| 09.1.1 | Audio and video equipment | 5.19 | -0.07 |
Comparison with neighbouring countries
Since the final HICP of the neighbouring countries will not be published until later, comparisons can only be made based on the first HICP flash estimate for July. This inflation amounted to 1.4% in July in Belgium, down from the 2.6% registered in June. The Netherlands also registered an inflation rate of 1.4% in July. This is a decrease compared to 1.7% in June. Inflation in France in July amounted to 1.6%, compared to 1.9% in June. In Germany, inflation amounted to 3.1% in July, which represents an increase compared to an inflation rate of 2.1% in June.
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Since the HICP at constant tax rates for July are not yet published by Eurostat, June is the most recent month to use as a basis for comparison. Belgium's inflation rate based on the HICP-CT stood at 2.7% in June, slightly up from a rate of 2.6% in May. In Germany, this inflation amounted to 2.2%, which represents a decrease compared to an inflation rate of 2.6% in May. This inflation rate in France slightly rose to 1.7% compared to 1.6% in May. In the Netherlands, this inflation rate dropped to 1.6% in June, compared to 1.8% in May.
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[1] In addition to the national consumer price index (CPI), Statbel also calculates a European harmonised consumer price index (Harmonised Index of Consumer Prices, HICP). The HICP is used to compare inflation rates in the EU Member States. To this end, the applied expenditure approach and methods have been coordinated as much as possible and laid down in European regulations. The results of the CPI and HICP are not the same. This is mainly due to a different weighting and composition of the basket of goods and services on which these indices are based.
The HICP is also used by the European Central Bank in its monetary policy. Additionally, the HICP is used to determine to what extent a Member State meets the inflation criteria set in the Treaty on European Union.
Differences between the HICP and the current CPI are:
- The weighting of the basket of goods and services in the HICP is mainly based on the national accounts. At lower detailed levels the Household Budget Survey is used. The CPI mostly uses the Household Budget Survey at all levels.
- The reference population of the HICP consists of private households (including tourists in Belgium) and institutional households (e.g. retirement homes and nursing homes). In the CPI, this population currently consists of private households with a reference person under a maximum age.
- The HICP uses the concept of domestic expenditure: expenditure in Belgium by the reference population. The CPI uses the concept of national expenditure: expenditure by the reference population irrespective of the location.
- Seasonal adjustment is not applied in the HICP, but is applied in the CPI to travels abroad and stays in holiday villages.
- Sales periods in the CPI are systematically spread over 6 months, but are included in the same month in the HICP.
- Current prices for domestic heating oil are used in the HICP calculation. A weighted 12-month average is applied in the CPI calculation.
[2]The HICP-CT is calculated in the same way as the regular HICP, but the prices in this index are calculated based on constant tax rates. This index therefore reflects the theoretically potential effect of changes in indirect tax rates (such as VAT or excise duties) on measured inflation. However, this is a theoretical effect, since it presupposes that tax changes are immediately and entirely reflected in prices paid by consumers.
[3]Inflation on annual basis measures the price changes between the current month and the same month of the year before. A 12-month average compares the average HICP of the last 12 months with the average of the previous 12 months. A monthly change compares the price levels of the last two months.
[4] The effect on inflation shows the changes on the inflation rate by including the sub-index in the HICP. The effect not only takes the weight of the sub-index into account, but it also takes into account whether the sub-index inflation is higher or lower than that of the total expenditure (overall HICP).