Methodological note on the Harmonised Index of Consumer Prices (HICP) 2008
The period of price collection (temporal coverage) of both the German Consumer Price Index (CPI) and the German Harmonised Index of Consumer Prices (HICP) has been extended (please refer also to Council Regulation (EC) No 701/2006 of 25 April 2006). The Regulation stipulates that, generally, price collection shall take place across at least a one week period near the middle of the calendar month. As regards goods and services which are characterised by volatile price movements, the collection period must exceed the above time. As Germany complied with the provisions of the above Regulation to a great extent in the past, too, an impact on the results can only be expected for very few goods. Regarding fuels, for instance, a certain smoothing effect could be expected on price fluctuations in the future though the index level as a whole should not be affected.
The seasonal will change for three time series of the overarching ‘travel area’
- air passenger transport
- package holidays
- accommodation services (rents for holiday homes and dwellings)
The reason is that, in accordance with the new approach, all high, mid and low season prices are included in the index calculation. In the past, it happened that, in individual years, the moving Easter and Whitsun holidays were not included in the index calculation because they fell on so-called unfavourable dates. And travel dates in (early) December other than during the Christmas holidays were not sufficiently represented. For the purposes of the German CPI, prices have therefore been collected again for the period from 2005 and been included in the index calculation.
As for the German CPI, the above methodological change was introduced together with other changes in the context of a CPI regular revision from reference month January 2005. In accordance with the relevant European provisions, the methodological change was implemented in the HICP from January 2008 (please see the paper entitled "The Harmonised consumer price index for Germany, differences between the Harmonised Index of Consumer Prices and the Consumer Price Index for Germany") published in the monthly journal "Wirtschaft und Statistik".
The extension of temporal coverage from January 2008 onwards influences the annual rates of change during 2008. In order to quantify this impact, an additional time series to the HICP has been compiled which simulates the extension of temporal coverage starting in January 2007. The difference between those two index developments shows that the HICP is influenced upwards by the extension of temporal coverage.
As the new methodology leads to changes in the seasonal, the decision of chaining the above time series using the annual average of 2005 was taken for the German CPI. As a consequence, the average annual rate of change for 2005 is not distorted.
Following the European provisions, chaining in an HICP context was based on the month of December 2007. As a result of applying the described approach to the above three time series, the rates of change from the relevant months of the previous year have been subject to an upward effect in 2008.
To quantify the extent of deviations, an additional calculation was made to simulate the effects of extending the data collection period in the area of travels as early as from January 2007.
The index trend obtained from that calculation for the year 2007 was above the index figures of the official HICP. This was the basis for higher change rates of the official HICP in 2008 as compared with the simulated calculation.
That effect was quantified for each month of 2008 by deducting the change rates of the simulated calculation from the official HICP change rates:
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