January 2022: annual update of the consumer price index (CPI) with reference year 2013 = 100

The consumer price index (CPI) with reference year 2013 = 100, which was introduced in January 2014, is a chain index that is updated every year in January. The purpose of the annual updates is to keep the CPI representative over time and to avoid misrepresenting the measured inflation as the index ages.

For the CPI with reference year 2013 = 100, this is the eighth update in a row. With a chain index, the choice of the reference year, i.e. the year in which the average of the index equals 100, is purely mathematical. The current reference year is 2013, which means that the average of the indices at all levels is 100 for that year.

The representativeness and the quality of the chain index are guaranteed over time, among others by keeping the product basket up-to-date, further refining calculation methods, integrating new price sources and by keeping a representative shop sample.

This is an overview of the changes for 2022. The Index Commission, composed of academics and representatives of the social partners, gave a unanimous positive opinion on this to the Minister of Economy. The Minister follows this opinion and the changes will therefore be implemented by Statbel in the consumer price index of January 2022.

Changes to the CPI in 2022

1. Use of scanner data for consumer electronics and large home appliances

Since 2015, Statbel has started with the progressive integration of scanner data and web scraping (so-called big data) as data sources for the CPI calculation. The use of scanner data (cash register data) and web scraping (automatically scraping data from web pages) improves the accuracy of the CPI. Indeed, the price index of a product group should no longer be based on a relatively limited sample of products, but we can process the prices of multiple items sold. This method results in an index that more closely matches actual consumption habits. Moreover, this approach ensured the timely and correct index calculation during the coronavirus crisis.

Until now, scanner data from department stores were mainly used for the calculation of prices of food and beverages, household products, personal care products,...Web scraping is currently mainly used to retrieve prices of clothes, footwear, hotel rooms, student rooms, second-hand motor cars, etc.

From 2022 onwards, scanner data will be used in the index calculation for consumer electronics and large home electrical appliances. This concerns data coming from large chain stores (both online and offline) and independent stores. With these scanner data, weekly sales data together with all product characteristics are retrieved.

This concerns the 10 following segments:

• consumer electronics: laptops, tablets, smartphones and televisions;
• large home electrical appliances: washing machines, tumble dryers, refrigerators, freezers, hobs and dishwashers.

The 10 segments together account for a weight share of 10.20‰ of the index basket.

These are segments that are not easy to measure in the classic way, for the following reasons:

• high product turnover (difficult to measure the same product over time);
• products entering the market at a high price and leaving it at a low price;
• products entering the market have different characteristics compared to products leaving the market.

In order to correctly incorporate these elements in the index calculation, a distinction should be made between the absolute price evolution and the price evolution due to other elements, such as quality changes. This is done using the product characteristics.

In 2022, 33.2% of the index basket weight will be followed via scanner data and web scraping.

2. Weighting scheme 2022

The ‘normal’ consumption pattern was heavily biased in 2020 and 2021 by the coronavirus pandemic. It is important that the CPI continues to measure price developments as closely as possible during and after the pandemic. To do so, one cannot rely on the weights that would be determined based on the household budget survey (HBS) of 2020 where all kinds of expenditure were much lower than in ‘normal’ years.

Concretely, the 2022 weighting scheme, like that of 2020 and 2021, was also based on the 2018 HBS. The weights based on the 2018 HBS were updated to 2021 with a so-called price update, since December 2021 is the new reference month for the chain index in 2022.

The table below compares the new weightings for 2022 to those for 2021. The large variations for the 12 main groups in the index basket are due to the increase in energy prices (contained in group 4 and the group 7). The relative share of energy in the index basket went from 84.71‰ to 98.75‰; which constitutes an increase of 16.6%. Within energy, the weight of natural gas increased by 35%, that of heating oil by 29%, that of electricity by 12% and that of motor fuels by 11%. The strong increase in the share of energy, and therefore also of group 4 and group 7, means that the relative weights of the other product groups in the index basket are falling. An exception to this rule is group 2 "alcoholic beverages and tobacco", the weight of which increases slightly. This is explained by the relatively sharp increase in the prices of these products in 2021, due to the increase in excise duties.

Evolution of the basket weights of the index from 2021 to 2022