Harmonised Index of Consumer Prices (HICP)

Harmonised index of consumer prices - March 2021

Consumer prices
Harmonised index of consumer prices - March 2021
  • Belgium's inflation rate based on the European harmonised index of consumer prices (HICP) was running at 1.6 % in March compared to 0.3 % in February.
  • Core inflation (inflation without energy and unprocessed food) amounted to 1.0 % in March compared to 0.3 % in February.
  • The inflation rate based on the consumer price index (CPI) for March stood at 0.9 % compared to 0.5 % in February.
  • The sub-indices with the largest upward effect on inflation were domestic heating, motor fuels, tobacco, electricity and gas.
  • The sub-indices with the largest downward effect on inflation this month were pharmaceutical products, fruit, meat, vegetables and personal care products.
  • 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). The objective is to distort as little as possible the global inflation rate. More information is available here.
  • The harmonised index of consumer prices of March for the EU Member States will be published by Eurostat on 16 April.

Inflation based on the European harmonised index of consumer prices (HICP)[1] was running at 1.6 % in March compared to 0.3 % in February. The inflation rate based on the harmonised index of consumer prices at constant tax rates (HICP-CT)[2] was running at 1.4 % in March, compared to 0.1 % in February. The difference in inflation between the HICP and the HICP-CT is largely due to the changes in excise duties on tobacco and the standardisation of VAT rates in the ‘horeca’ sector. These increases 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 March was measured for "alcoholic beverages and tobacco" (4.6 %). The lowest inflation rate was measured for "food and non-alcoholic beverages"
(-0.7 %).

The main group with the largest upward effect on inflation in March was "housing, water, energy" with an effect on inflation of 0.6 percentage points. The largest downward effect was measured for “food and non-alcoholic beverages” with -0.5 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
Jan/21 Feb/21 Mar/21 Mar/21 Jan/21 Feb/21 Mar/21
0 Total expenditure 1.000 0.6 0.3 1.6 1.4      
1 Food and non-alcoholic beverages 180.8 0.7 -0.1 -0.7 -0.7 0.0 -0.1 -0.5
2 Alcoholic beverages and tobacco 53.6 1.9 4.2 4.6 -2.0 0.1 0.2 0.2
3 Clothing and footwear 52.3 0.6 -9.7 0.2 0.2 0.2 -0.5 -0.1
4 Housing, water and energy 172.0 -1.0 1.8 4.3 4.3 -0.2 0.3 0.6
5 Interior decoration and household appliances 82.3 0.7 -0.2 0.3 0.3 0.0 0.0 -0.1
6 Health 78.8 -0.5 -0.2 -0.2 -0.2 -0.1 0.0 -0.2
7 Transport 116.0 -1.2 0.7 3.7 3.7 -0.3 0.0 0.3
8 Communication 33.0 0.2 0.5 0.6 0.6 0.0 0.0 0.0
9 Recreation and culture 81.9 2.1 0.5 0.8 0.8 0.2 0.0 -0.1
10 Education 5.3 0.5 0.5 0.6 0.6 0.0 0.0 0.0
11 Hotels, cafés and restaurants 60.7 1.7 1.4 1.6 1.6 0.1 0.1 0.1
12 Various goods and services 83.3 1.4 1.0 0.7 0.7 0.1 0.1 -0.1

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 8.7 % in March compared to 0.1 % in February and -6.7% in January. Prices increased on average by 3.1 % compared to the previous month. The average inflation rate of this aggregate for the last twelve months is -9.3 %.
  • Inflation for processed food products decreased compared to the previous month. It was running at 1.1 % in March compared to 1.3 % in February.
  • Inflation for unprocessed food (fruit, vegetables, meat and fish) has gone down. It was running at -1.9 % in March compared to -0.9 % in February and -1.4 % in January. Prices increased on average by 2.7 % compared to February. The average inflation rate of this aggregate for the last twelve months is 3.9 %.
  • Inflation for non-energy industrial goods was running at 0.3 % in March, compared to -1.6 % in February and 1.7 % in January. Prices increased on average by 1.8 % compared to February.
  • Inflation for services (including rents) amounted to 1.3 % in March compared to 1.2 % in February and 1.4 % in January. Prices decreased on average by 0.3 % compared to the previous month.

Core inflation (inflation without energy and unprocessed food) was running at 1.0 % in March, an increase compared to 0.3 % in February. Average core inflation over the last 12 months amounts to 1.3 %. Prices of this subaggregate increased by 0.5 % compared to the previous month.

Inflation according to specific aggregates

Specific aggregates Weight (‰) Inflation on annual basis (%) 12-month average (%) Monthly change
Jan/21 Feb/21 Mar/21 Mar/21 Mar/21
Total expenditure 1000.0 0.6 0.3 1.6 0.4 0.9
Fuels and energy sources 95.6 -6.7 0.1 8.7 -9.3 3.1
Processed food products 187.2 1.6 1.3 1.1 1.9 0.4
Unprocessed food 47.2 -1.4 -0.9 -1.9 3.9 2.7
Non-energy industrial goods 276.9 1.7 -1.6 0.3 0.6 1.8
Services 393.0 1.4 1.2 1.3 1.6 -0.3
HICP without energy and unprocessed food (core inflation) 857.2 1.5 0.3 1.0 1.3 0.5

Effect of sub-indices on inflation

The largest upward effect on inflation was caused by domestic heating (0.25 percentage points). Motor fuels had a positive impact of 0.24 percentage points. Tobacco provided an effect of 0.20 percentage points. Electricity provided an effect of 0.11 percentage points. Moreover, gas provided an upward effect of 0.10 percentage points.

Sub-indices with the largest upward effect on inflation

Sub-index Weight (‰) Effect on inflation (percentage point)
2021 Mar/21
04.5.3 Domestic heating 12.1 0.25
07.2.2 Motor fuels 29.6 0.24
02.2.0 Tobacco 35.0 0.20
04.5.1 Electricity 35.8 0.11
04.5.2 Gas 17.1 0.10

The largest downward effect on inflation came from pharmaceutical products (-0.10 percentage points). Fruit provided an effect of -0.08 percentage points. The impact of meat on inflation was also -0.08 percentage points. Vegetables and personal care products had both a negative effect of -0.07 percentage points.

Sub-indices with the largest downward effect on inflation

Sub-index Weight (‰) Effect on inflation (percentage point)
2021 Mar/21
06.1.1 Pharmaceutical products 15.9 -0.10
01.1.6 Fruit 12.5 -0.08
01.1.2 Meat 47.4 -0.08
01.1.7 Vegetables 17.5 -0.07
12.1.3 Personal care products 13.9 -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 March.

In March, inflation in Belgium was running at 1.6 %, up from the 0.3 % registered in February. The Netherlands registered an inflation rate of 1.9 % in March, which remained stable compared to February. In France, the inflation rate was 1.4 % in March compared to 0.8 % in February. In March, inflation in Germany amounted to 2.0 %, an increase compared to an inflation rate of 1.6 % in February.

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Since the HICP at constant tax rates for March are not yet published by Eurostat, February is the most recent month to use as a basis for comparison. Belgium's inflation rate based on the HICP-CT stood at 0.1 % in February, down from a rate of 0.7% in January. In February, this inflation in Germany amounted to 1.9 %, an increase compared to an inflation rate of 1.8 % in January. In France, the inflation rate remained stable in February. It amounted to 0.5 % both in February and January. In the Netherlands, this inflation was running at 1.5% in February, up from 1.2% in January.

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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).

Table 1
Content

Inflation calculated based on harmonised index of consumer prices by group of products and services, last 12 months

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Graph
Content
Table 2
Table 3
Content

Inflation measured through harmonised index of consumer prices by specified aggregates, last 12 months

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Table 4

Purpose and brief description

The Harmonised Index of Consumer Prices (HICP) is an economic indicator designed to measure over time the price evolution of goods and services purchased by households. The HICP therefore allows for a comparable measurement of inflation in the euro area, the EU, the European Economic Area and for all other countries including candidate countries for the European Union. The HICP is calculated in a harmonised manner and on the basis of common concepts. The HICP is the official measure of inflation in the euro area to enable the European Central Bank to conduct its monetary policy.

Population

Final expenditure of households living on Belgian territory.

Frequency

Monthly.

Release calendar

Results available 15 days after the reference period

Definitions

Harmonised consumer price index (HICP): The Harmonised Index of Consumer Prices (HICP) was created in 1997 in order to have a comparable measurement of the inflation among the participating countries of the future euro area. Since the inception of the euro, the HICP has been one of the European Central Bank's (ECB) most important measuring instruments in the conduct of its monetary policy. The collected prices are those actually borne by the consumers, including for example taxes on products, such as value added tax, and take into account the sales periods.

Inflation: Inflation is defined as the ratio between the value of the consumer price index of a given month and the index of the same month the year before. Therefore, inflation measures the rhythm of the evolution of the overall price level.

COICOP; COICOP is a nomenclature, developed by the United Nations, that aims to classify individual consumption expenditures of households according to purpose.

Harmonised Index at constant tax rates: The Harmonised Index of Consumer Prices at constant tax rates is derived from the HICP and is calculated by keeping the level of indirect taxes (mainly excise duties and VAT) constant compared to the level observed in December of the previous year. This index allows measuring the maximum effect on the inflation of changes in taxes by assuming that they are directly and fully passed on to the final price paid by consumers.

Weighing: Weight in the basket of goods and services determined by the results of the national accounts (expenditure optics) and those of the household budget survey.

Inflation at constant tax rates: Inflation is defined as the ratio between the value of the consumer price index of a given month and the index of the same month the year before. Therefore, inflation measures the rhythm of the evolution of the overall price level.

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