• Belgium's inflation rate based on the European harmonised index of consumer prices (HICP) was running at 3.8% in September, down from 4.7% in August.
• Core inflation (inflation without energy and unprocessed food) stood at 1.7 % in September, down from 2.9% in August.
• The inflation rate based on the consumer price index (CPI) for September stood at 2.9% compared to 2.7% in August.
• The sub-indices with the largest upward effect on inflation were gas, domestic heating oil, electricity, motor fuels, tobacco and package holidays.
• Most of the downward pressure on inflation this month came from meat, clothing, bread and cereals, housing rent, fruit, telecommunications, nursing in hospital and dairy products.
• The harmonised index of consumer prices of September for the EU Member States will be published by Eurostat on 20 October.

Inflation based on the European harmonised index of consumer prices (HICP)^[1]  was running at 3.8% in September, compared to 4.7% in August. The inflation rate based on the harmonised index of consumer prices at constant tax rates (HICP-CT) ^[2] was running at 3.5% in September, compared to 4.4% in August. 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.

Core inflation, which does not take into account price evolutions of energy products and unprocessed food, stood at 1.7% in September, compared to 2.9% in August and -0.5% in July. Inflation without energy went down to 1.5% in September compared to 2.6% in August and -0.7% in July.

The sharp increase in inflation in recent months is due to energy products. The contribution of energy to inflation^[3]  amounts to 2.5%.

Electricity is now 17.3% more expensive than a year ago. Natural gas is 48.9% more expensive on an annual basis. Price for domestic heating oil has gone up by 58.1% compared to last year.

Inflation and effect on inflation for the 12 main groups

Based on the breakdown into 12 main groups, the highest inflation rate in September was measured for ‘Housing, water, energy’ (13.1%). 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 September was ‘Housing, water, energy’ with an effect on inflation of 1.8 percentage points. The largest downward effect was measured for ‘food and non-alcoholic beverages’ with -1.0 percentage points.

Inflation^[4] and effect^[5] 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.

• Inflation for energy products increased compared to the previous month. It was running at 27.3% in September, as against 24.5% in August and 22.1% in July. Prices increased on average by 1.2% compared to the previous month. The average inflation rate of this aggregate for the last twelve months is 8.3%.
• Inflation for processed food increases from 1.6% in August to 1.8% in September.
• Inflation for unprocessed food (fruit, vegetables, meat and fish) remains stable. It was running at -2.3% in September and August compared to -3.6% in July. Prices increased on average by 0.3% compared to August. The average inflation rate of this aggregate for the last twelve months is -0.7%.
• Inflation for non-energy industrial goods was running at 1.1% in September compared to 6.5% in August and -4.3% in July. Prices increased on average by 0.3% compared to the previous month.
• Inflation for services (including rents) amounted to 2.0% in September. This is an increase compared to August, when inflation was 1.3%. Prices decreased by 0.5% on average compared to the previous month.

Core inflation (inflation without energy and unprocessed food) was running at 1.7% in September, a decrease compared to 2.9% in August. Average core inflation over the last 12 months amounts to 1.2%. Prices of this subaggregate decreased by 0.2% 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 gas (0.69 percentage points). Domestic heating oil and electricity had a positive impact of 0.56 and 0.48 percentage points respectively. Motor fuels provided an effect of 0.46 percentage points. Tobacco provided an upward effect of 0.22 percentage points. Package holidays provided a positive impact of 0.09 percentage points.

Sub-indices with the largest upward effect on inflation

The largest downward effect on inflation came from meat (-0.17 percentage points). Clothing provided an effect of -0.15 percentage point. Bread and cereals, housing rent and fruit had an effect of -0.13 percentage points each. Telecommunication had a negative impact of -0.12 percentage points. Nursing in hospital had a negative impact of -0.10 percentage points. Finally, dairy products had a negative impact of -0.09 percentage points.

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 September. This inflation amounted to 3.8% in September in Belgium, down from the 4.7% registered in August. The Netherlands registered an inflation rate of 2.9% in September. This is an increase compared to 2.7% in August. Inflation in France in September amounted to 2.7%, compared to 2.4% in August. In Germany, inflation amounted to 4.1% in September, which represents an increase compared to an inflation rate of 3.4% in August.

Since the HICP at constant tax rates for September is not yet published by Eurostat, August is the most recent month to use as a basis for comparison. Belgium's inflation rate based on the HICP-CT stood at 4.4% in August, up from a rate of 1.1% in July. The sharp fluctuation in the inflation rate between July and August is due to the sales period being moved from July to August in 2020. In Germany, inflation amounted to 1.6% in August, which represents an increase compared to an inflation rate of 1.3% in July. This inflation rate in France rose to 2.2% compared to 1.4% in July. In the Netherlands, this inflation rate increased to 2.6% in August, compared to 1.3% in July.

^[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 have been neutralised in the CPI , 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]The contribution to inflation of a specific product group shows how much of the change in the total expenditure is due to the price variation of this product group.

^[4] 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.

^[5]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).