Harmonised index of consumer prices -  May 2020

• Belgium's inflation rate based on the European harmonised index of consumer prices (HICP) was running at
• -0.2 % in May compared to 0.0 % in April. Core inflation (inflation without energy and unprocessed food) stood at 1.6 % in May.
• The inflation rate based on the consumer price index (CPI) for May stood at 0.5 % compared to 0.6 % in April.
• The sub-indices with the largest upward effect on inflation were rents, restaurants and cafés and meat.
• However, the sub-indices with the largest downward effect on inflation were motor fuels, liquid fuels and gas.
• The current measures due to the COVID-19 had an impact on the calculation of the index. For sectors where physical outlets are closed, data are collected online when there is no other data source. For sectors that are completely closed (cafés, restaurants, travels, etc.) prices are carried forward with or without a seasonal correction factor. These methods are in line with the methodological recommendations established by Eurostat in consultation with the National Statistical Institutes (Statbel in Belgium), they are in order to distort as little as possible the headline inflation rate. More information is available here.
• The harmonised index of consumer prices of May for the EU Member States will be published by Eurostat on 17 June.

Inflation based on the European harmonised index of consumer prices (HICP) ^[1] stood at -0.2 % in May, compared to 0.0 % in April. Inflation based on the harmonised index of consumer prices at constant tax rates (HICP-CT)^[2]was also running at -0.2 % in May, compared to 0.0 % in April.

Inflation and effect on inflation for the 12 main groups

Based on the breakdown into 12 main groups, the highest inflation rate in May was measured for “Food and non-alcoholic beverages” (3.6 %). The lowest inflation rate was measured for “Housing, water and energy” (-5.8 %).

The main group with the largest upward effect on inflation in May was “Food and non-alcoholic beverages” with an effect of 0.7 percentage point. The largest downward effect was measured for “Housing, water and energy” (-1.0 percentage point).

Inflation^[3] and effect^[4] on inflation for the overall HICP and 12 main groups

Inflation according to specific aggregates

The overall HICP can be broken down into five specific aggregates which together form the total expenditure.

• The inflation rate for fuels and energy sources has gone down for the fourth month in a row. It stands at
• -18.9 % in May compared to -16.8 % in April and -11.8 % in March. Prices decreased on average by 1.6 % compared to the previous month. The average inflation rate of this aggregate for the last twelve months is-7.4 %.
• The inflation for processed food products remains unchanged compared to the previous month after four consecutive months of increase. It stood at 2.7 % in May and April, compared to 2.6 % in March. Compared to April, prices remained on average unchanged.
• Inflation for unprocessed food (fruit, vegetables, meat and fish) is on the rise for the seventh month in a row. It stands at 6.4 % in May compared to 5.7 % in April and 2.8 % in March. Prices increased on average by 0.3 % compared to April. The average inflation rate of this aggregate for the last twelve months is 1.1 %.
• Inflation for non-energy industrial goods was running at 0.9 % in May, down from 1.0 % in April and March. Prices increased on average by 0.1 % compared to the previous month.
• Inflation for services (including rents) stands at 1.6 % in May and April compared to 1.9 % in March. Prices decreased by 0.2 % on average compared to the previous month.

Core inflation (inflation without energy and unprocessed food) was running at 1.6 % in May and April, a slight decrease compared to 1.7 % in March. Average core inflation over the last 12 months amounts to 1.6 %. Prices of this subaggregate have decreased by 0.1 % compared to the previous month.

Inflation according to specific aggregates

Effect of sub-indices on inflation

The largest upward effect on inflation was caused by rents (0.22 percentage point). Meat and restaurants and cafés had an impact of 0.16 percentage point each

Sub-indices with the largest upward effect on inflation

The largest downward effect on inflation came from motor fuels and lubricants (-0.72 percentage point). Liquid fuels had a downward impact of -0.64 percentage point. Finally, gas provided a downward effect of -0.27 percentage point.

Sub-indices with the largest downward effect on inflation

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 May. In May, inflation in Belgium was running at -0.2 %, down from the 0.0 % registered in April. The Netherlands registered an inflation rate of 1.0 % in May and April. Inflation in France in May amounted to 0.2 %, down from the rate of 0.4 % observed in April. Inflation in Germany in May amounted to 0.5 %, down from the rate of 0.8 % observed in April.

Since the HICP at constant tax rates for May are not yet published by Eurostat, April is the most recent month to use as a basis for comparison. Belgium's inflation rate based on the HICP-CT stood at 0.0 % in April, down from a rate of 0.4 % in March. This inflation in Germany in April amounted to 0.9 %, a decrease compared to the rate of 1.3 % observed in March. In France, this inflation was 0.2 % in April compared to 0.6 % in March. This inflation in the Netherlands in April amounted to 1.2 %, slightly down from 1.3 % in March.

^[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]An effect on inflation shows the changes on the inflation rate by including this sub-index in the CPI calculation. 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).