​Harmonised Index of Consumer Prices: December 2019

17 January 2020 | 1100 hrs | 007/2020

Harmonised Index of Consumer Prices (HICP): December 2019

1. Main points

• In December 2019, the annual rate of inflation as measured by the Harmonised Index of Consumer Prices (HICP) remained at a constant rate of 1.3 per cent (Table 2).
• The twelve-month moving average rate for December stood at 1.5 per cent (Table 2).
• The largest upward impact on annual infl ation was measured in the Food and Non-Alcoholic Beverages Index, while the largest downward impact was recorded in the Clothing and Footwear Index (Chart 2).

Chart 1. Inflation rates

per cent

3.0

2.5

2.0

1.5

1.0

0.5

0.0
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
2017			2018	2019
			Annual rate	year	12-month moving average rate

Compiled by: Price Statistics Unit

Contact us: National Statistics Office, Lascaris, Valletta VLT 20001 T. [phone], E. [e-mail]

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2. Overview

The HICP measures monthly price changes in the cost of purchasing a representative basket of consumer goods and services. The HICP is calculated according to rules specified in a series of European Union Regulations that were developed by Eurostat in conjunction with the EU Member States. The HICP is used to compare inflation rates across the European Union. A closely related measure of price movements is the Retail Price Index (RPI). For a description of the differences between the HICP and the RPI, refer to page 5 of this news release.

Each monthly HICP News Release includes three different measures of inflation:

1. The annual inflation rate measures average price changes between the reference month and the same month of the previous year. Although responsive to recent changes in price levels, this measure can be influenced by one-off effects in either month.
2. The monthly inflation rate compares price changes between the reference month and the previous month. This measure can be highly influenced by seasonal effects.
3. The 12-month moving average rate overcomes the volatility of the above two rates by comparing the average of the latest 12 indices to the average of the previous 12 indices. This measure is less sensitive to temporary changes in prices.

3. Price changes and effects on inflation

Table 1 shows that the highest annual inflation rates in December 2019 were registered in the following divisions: Education (2.4 per cent) and Food and Non-alcoholic Beverages (2.2 per cent). On the other hand, the lowest annual inflation rates were registered in Clothing and Footwear (-2.4 per cent) and Furnishings, Household Equipment and Routine Household Maintenance (-0.9 per cent).

Table 1. HICP indices

Average 2015=100 1

			Indices		Annual	Monthly
Division	Weight			rate (%)	rate (%)
		Dec 2018	Nov 2019	Dec 2019	Dec 2019	Dec 2019
Food and Non-alcoholic Beverages	161.45	109.42	110.87	111.79	2.2	0.8
Alcoholic Beverages and Tobacco	37.22	107.89	108.40	108.24	0.3	-0.1
Clothing and Footwear	49.22	107.38	103.53	104.79	-2.4	1.2
Housing, Water, Electricity, Gas and	85.14	104.73	106.01	106.16	1.4	0.1
Other Fuels
Furnishings, Household Equipment and	76.73	109.03	108.43	108.07	-0.9	-0.3
Routine Household Maintenance
Health	40.56	105.36	107.28	107.38	1.9	0.1
Transport	135.62	101.61	102.48	103.18	1.5	0.7
Communication	33.96	96.57	96.56	96.53	0.0	0.0
Recreation and Culture	102.96	97.85	99.66	99.73	1.9	0.1
Education	23.36	104.65	107.17	107.17	2.4	0.0
Restaurants and Hotels	177.53	91.10	95.45	92.68	1.7	-2.9
Miscellaneous Goods and Services	76.25	104.49	106.18	106.46	1.9	0.3
All Items	1,000.00	102.13	103.69	103.44	1.3	-0.2

• see methodological note 5.3

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Chart 2 depicts the impacts on the annual inflation rate by the 12 main divisions. An impact is a measure showing the change in inflation as a result of the inclusion of an index. Such an impact takes into account both the weight and the annual rate of inflation by division.

In December 2019, the largest upward impact on annual inflation was registered in the Food and Non-alcoholic Beverages Index (+0.35 percentage points), due to higher prices of milk. The second and third largest impacts were measured in the Restaurants and Hotels Index (+0.31 percentage points) and the Transport Index (+0.21 percentage points), mainly on account of higher prices of restaurant services (including cafés and similar outlets) and fuels respectively (Chart 2).

The downward impacts on annual inflation were registered in the Clothing and Footwear Index (-0.12 percentage points) and the Furnishings, Household Equipment and Routine Household Maintenance Index (-0.07 percentage points). These were mainly due to lower prices of garments and furniture/furnishings respectively (Chart 2).

Chart 2. Contribution to the annual inflation rate by the 12 main divisions: December 2019

Food and Non-alcoholic Beverages							0.35
Restaurants and Hotels							0.31
Transport					0.21
Recreation and Culture					0.20
Miscellaneous Goods and Services					0.14
Housing, Water, Electricity, Gas and Other Fuels					0.12
Health				0.08
Education				0.06
Alcoholic Beverages and Tobacco				0.01
Communication		0.00
Furnishings, Household Equipment and Routine Household…	-0.07
Clothing and Footwear	-0.12
-0.20	-0.10	0.00	0.10	0.20	0.30	0.40
				percentage points

Note: A percentage point is the arithmetic difference between two percentages.

Table 2. Inflation rates by month and year

		2017		2018		2019
Month			12-month			12-month			12-month
Annual rate		moving	Annual rate		moving	Annual rate		moving
	(%)		average rate	(%)		average rate	(%)		average rate
			(%)			(%)			(%)
January	1.4		1.0	1.2		1.2	1.0		1.7
February	1.2		1.0	1.3		1.2	1.3		1.7
March	1.2		1.0	1.3		1.3	1.3		1.7
April	1.1		1.0	1.4		1.3	1.7		1.7
May	1.1		1.0	1.7		1.3	1.7		1.7
June	1.0		1.0	2.0		1.4	1.8		1.7
July	1.2		1.0	2.1		1.5	1.8		1.7
August	1.2		1.1	2.4		1.6	1.9		1.7
September	1.2		1.1	2.5		1.7	1.6		1.6
October	1.5		1.2	2.1		1.8	1.4		1.5
November	1.5		1.2	1.4		1.8	1.3		1.5
December	1.3		1.3	1.2		1.7	1.3		1.5

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4. HICP (Malta and euro area)

This section compares the Maltese HICP with the euro area counterpart for the latest available data, that is November 2019. In November, the annual rate of change registered by the Maltese HICP All-Items Index was

1.3 per cent, 0.3 percentage points higher than the 1.0 per cent rate registered for the euro area (Chart 3). The annual rate of change for the Maltese All-Items HICP excluding energy and unprocessed food was 1.4 per cent, the same rate as registered for the euro area (Chart 4).

Chart 3. All-Items HICP in Malta and the euro area

	2.5		2.5
	2.0		2.0
annual rate of change (%)	1.5		1.5	difference (percentage points)
1.0		1.0
0.5		0.5
0.0		0.0
	-0.5		-0.5
	-1.0		-1.0
	J A S O N D J F M A M J J A S O N D J F M A M J J A S O N
	2017	2018	2019

			year
		Difference	Malta (annual rate of change)	Euro area (annual rate of change)
Source: Eurostat

Chart 4. All-Items HICP in Malta and the euro area excluding energy and unprocessed food

	2.5		2.5
	2.0		2.0	difference (percentage points)
annual rate of change (%)	1.5		1.5
1.0		1.0
0.5		0.5
0.0		0.0
-0.5		-0.5
	-1.0		-1.0
	J A S O N D J F M A M J J A S O N D J F M A M J J A S O N
	2017	2018	2019
source: Eurostat		year

Difference

Malta (annual rate of change)

Euro area (annual rate of change)

Source: Eurostat

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5. Background notes

1. Accessing data
   Further information on HICP and RPI NSO publications may be accessed from:
   https://nso.gov.mt/en/News_Releases/View_by_Unit/Unit_A5/Price_Statistics/Pages/Harmonised-Index-of-Consumer-Prices.aspxandhttps://nso.gov.mt/en/News_Releases/View_by_Unit/Unit_A5/Price_Statistics/Pages/Retail-Price-Index.aspxrespectively.
   Eurostat publications on HICP may be accessed from: http://ec.europa.eu/eurostat/news/news-releases
2. Differences between HICP and RPI
   Both indices are compiled using a large and representative selection of more than 440 different goods and services for which price movements are regularly monitored. Around 10,000 separate price quotations are used each month to compile the Index.
   The methodology underlying HICP and RPI is similar, yet there are differences:
3. 1. The RPI captures private households only whereas the HICP covers private households, institutional households (such as retirement homes) and foreign visitors to Malta.
   2. The population base year of the two indices is different. The RPI is a fixed base index with weights periodically updated in line with the Household Budgetary Survey. On the other hand, the HICP is a chain-linked index with the weights reviewed on an annual basis. Unlike the RPI where the sample of goods and services changes every time the weights are updated, newly significant goods and services can be introduced in the HICP framework on an annual basis.
   3. The coverage of the HICP is based on an international classification system, COICOP (Classification of Individual Consumption by Purpose), whereas the RPI has a different set of codes for each group of items.

Group	COICOP division	Weight	RPI group	Weight
(out of 1000)	(out of 100)
1	Food and Non-alcoholic Beverages	161.45	Food (including restaurant services	21.49
and take-aways)
2	Alcoholic Beverages and Tobacco	37.22	Beverages and Tobacco	5.56
3	Clothing and Footwear	49.22	Clothing and Footwear	6.62
4	Housing, Water, Electricity, Gas and	85.14	Housing	7.90
Other Fuels
5	Furniture, Household Equipment and	76.73	Water, Electricity, Gas and Fuels	3.31
Routine Household Maintenance
6	Health	40.56	Household Equipment and House	6.97
Maintenance Costs
7	Transport	135.62	Transport and Communication	22.10
8	Communication	33.96	Personal Care and Health	8.81
9	Recreation and Culture	102.96	Recreation and Culture (including	9.90
education)
10	Education	23.36	Other Goods and Services	7.34
11	Restaurants and Hotels	177.53
12	Miscellaneous Goods and Services	76.25
	Total	1,000.00	Total	100.00

Apart from the disparities identified above, both the RPI and the HICP:

• have the same geographic coverage, implying that both indices refer to the whole country;
• utilise the same price collection methodologies; and
• utilise the same outlet sample (with some exceptions).

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1. Further information
   The HICP is used to compare inflation rates across the European Union (EU). It has been used by the European Central Bank (ECB) as the measure of price stability across the euro area since January 1999. Indeed, the HICP was developed in the EU for the purpose of assessing whether prospective members of the European Monetary Union would meet the inflation convergence criterion, and later acting as the measure of inflation used by the ECB to assess price stability in the euro area. The main requirement was for a measure that could be used to make reliable comparisons of inflation rates across EU Member States. Such comparisons are not possible using national consumer price indices due to differences in index coverage and construction.
   The HICP is being published with 2015 as its base year. The previous series with reference 2005=100 has been discontinued. Commission Regulation (EU) No 2015/2010 provides the legal basis for updating the HICP reference year from 2005=100 to 2015=100. It should be noted that the re-basing operation was conducted after rounding all past indices to one decimal place. Therefore, there might be slight differences when comparing this series with past data due to rounding.
   The HICP largely follows National Accounts concepts of what constitutes household consumption in determining the index scope and mainly uses National Accounts data sources to weight the items in the basket. This makes for increased coherence between the HICP commodity and population coverage and National Accounts principles. As a result, HICP weights are therefore based on the final consumption expenditure of all individuals in the domestic territory, including spending by private households, institutional households and foreign visitors. National Accounts principles have also influenced the classification of goods and services within this index. The basket of consumption items considered for the HICP is reviewed annually in line with National Accounts (NA) data collected over a 12-month period in order to obtain an estimate of the average household expenditure. New products are included in the basket of items when achieving a sales volume of over one part per thousand of total consumer expenditure covered by the HICP.
   The HICP weighting scheme is annually updated in accordance with Commission Regulation (EU) No 1114/2010. The treatment of seasonal items is in accordance with Commission Regulation (EC) No 330/2009.
   The HICP Flash Estimates started being compiled and transmitted to Eurostat on a monthly basis as from January 2017. These refer to tentative HICP indices and are used to provide an insight to users about the annual rates of special aggregates as determined by Eurostat. Eurostat collects data from all European member countries and compiles annual rates of special aggregates for the whole of the euro area. The latest release published by Eurostat may be accessed at this link: https://ec.europa.eu/eurostat/publications/news-releases
   Users are advised to consult the NSO before comparing the results of the HICP and the RPI.
   More information on the metadata underlying HICP and RPI News Releases may be accessed from:
   Sources and Methods:https://nso.gov.mt/en/nso/Sources_and_Methods/Unit_A5/Price_Statistics/Pages/Harmonised-Index-of-Consumer-Prices.aspx
   Statistical Concepts:https://nso.gov.mt/metadata/concepts.aspx
   Metadata (HICP):https://nso.gov.mt/metadata/reports.aspx?id=9
   Metadata (RPI):https://nso.gov.mt/metadata/reports.aspx?id=10
   Classifications:https://nso.gov.mt/metadata/classificationdetails.aspx?id=COICOP%201999HICP and RPI Manual:https://nso.gov.mt/en/nso/Sources_and_Methods/Unit_A5/Price_Statistics/Documents/RPI_and_HICP_Manual.pdf Statistical database:https://ec.europa.eu/eurostat/web/hicp/data/database
   References to this news release are to be cited appropriately.
   The euro area mentioned in Section 4 refers to the 19 Member States that adopted Euro as their national currency.
2. Publication policy
   A calendar for future news releases may be accessed at the link:
   https://nso.gov.mt/en/News_Releases/Release_Calendar/Pages/News-Release-Calendar.aspx

6. Methodological notes

1. Reassessments / revisions:
   The HICP series is published with base year 2015 according to Eurostat base year revisions https://ec.europa.eu/eurostat/documents/272892/272971/HICP+reference+year+2015%3D100/. This policy for revisions was published in November 2004 and is used for the calculation of consumer price inflation statistics https://nso.gov.mt/en/nso/About_NSO/Documents/Annual_Reports/AnnualReport2004.pdf (page 64). Note that the RPI series is published in accordance to the reference base December 2016.
2. Time series
   Data from 1996 onwards is accessible from the following link: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=prc_hicp_midx&lang=en.

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