Harmonized Index of Consumer Prices (HICP)

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Prices and Consumption, Economic Statistics
Martin Sædholm Nielsen
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Harmonized Index of Consumer Prices (HICP) 2024

The harmonized index of consumer prices (HICP) is compiled by all EU Member States and Norway, Iceland and Switzerland. The purpose of the harmonized consumer price indices is to be able to estimate the development in the countries' consumer prices on a comparable basis. HICP is used both by the Commission and by the European Central Bank in connection with the valuation of the price development in the individual countries in connection with the implementation and monitoring of the 3rd phase of the EMU. All the EU Member States and Norway and Iceland have compiled HICP since January 1997.

Statistical presentation

HICP shows the development of prices for goods and services bought by private households in Denmark. Thus, the index also covers foreign households' consumption expenditure in Denmark, but not Danish households' consumption expenditure abroad. The index shows the monthly changes in the costs of buying a fixed basket of goods, the composition of which is made up in accordance with the households' consumption of goods and services.

The price indices for April, May, June, July, August, September, October, November, December 2020 and January, February, March, April, May and June 2021 are more uncertain than usual, as the non-response rate has been significantly larger than normal and some businesses have been shut down due to COVID-19.

Statistical processing

The HICP is calculated on the basis of 23,000 prices collected from approx. 1,600 shops, companies and institutions throughout Denmark. Most prices are by far collected monthly. The data material received is examined for errors, both by computer (using the so called HB-method) and manually. The different goods and services, which are included in the HICP, are first grouped according to approx. 500 elementary aggregates for which elementary aggregate indices are calculated. The elementary aggregate indices are mainly calculated as geometric indices. The elementary aggregate indices are weighted together into sub-indices that are in turn aggregated into the total HICP.

Relevance

The HICP is generally viewed as a reliable statistic based on the views of users.

Important users are among others The European Central Bank, The European Commission, The Ministry of Finance, The Ministry of Economic Affairs and the Interior, The Danish Central Bank as well as private banks and other financial organizations.

Accuracy and reliability

No calculation has been made of the uncertainty connected with sampling in the HICP as the sample is not randomly drawn, but the quality of the HICP is accessed to be high. In connection with COVID-19, uncertainty is greater than usual as it has been difficult to collect prices and many industries have been closed down.

In addition to the "general" uncertainty connected with sampling, there are a number of sources of potential bias in the consumer price index. One source is the consumers substitution between goods and shops and another source is changes in the sample.

Timeliness and punctuality

The HICP is published on the 10th or the first working day thereafter, following the month in which the data was collected.

The statistics are published without delay in relation to the scheduled date.

Comparability

The Danish HICP can be compared directly with other countries' HICPs. Using the HICPs it is possible to compare the inflation rates between different countries directly.

The Danish HICP is also related to the national consumer price index.

From January 2001, the only difference between the national consumer price index and the HICP is the coverage of goods and services, as owner-occupied dwellings is only recorded in the consumer price index and not in the HICP.

From January till December 2000, the only difference between the national consumer price index and the HICP is that both owner-occupied dwellings and private hospitals are only recorded in the consumer price index and not in the HICP.

Before January 2000, there are differences in calculation and methodology between the two indices as well as several differences as regards their coverage of goods and services.

Accessibility and clarity

These statistics are published monthly in a Danish press release and in the StatBank under Harmonized index of consumer prices (HICP). The HICP of all Member States is also published by Eurostat in Statistics in Focus/Economy and Finance and on Eurostat.