Differences between consumer price figures

© Hollandse Hoogte / Richard Brocken
As of 1996, Statistics Netherlands (CBS) publishes two different inflation rates: one based on the Consumer Price Index (CPI) and one based on the Harmonised Index of Consumer Prices (HICP). In order to facilitate comparion between countries, EU member states calculate a consumer price index according to internationally agreed definitions and methods. The European Central Bank (ECB) uses the HICP to formulate its monetary policies in the euro area.

The main difference between the CPI and the HICP for the Netherlands is that, unlike the CPI, the HICP does not take into account the costs related to home ownership. Such costs account for approximately 15 percent in the weighting of the CPI.

The methodological differences can be divided into four themes:

  • Scope: which expenses are included;
  • Population: which consumers and which transactions are included in the index;
  • Price definition: how are certain prices defined;
  • Classification.

Scope

The main difference between the CPI and the HICP is the composition of the basket of goods and services on which both indices are based.

Three groups of goods and services are included in the CPI, but not in the HICP:

  • Services related to owner-occupied dwellings;
  • Contributions;
  • Consumption-related taxes.

For households living in rented dwellings, the rent is included in both the CPI and the HICP. For households living in owner-occupied dwellings, an imputed rent is calculated in the CPI and its development contributes to the CPI. The HICP does not include costs related to living in an owner-occupied dwelling.

Contributions to sports and leisure clubs and to civil society organisations are included in the CPI, but not in the HICP. According to the rules of the HICP, these costs do not fall under consumption.

Consumption-related taxes such as motor vehicle tax and dog tax also fall outside the scope of the HICP. Conversely, co-payments for living in an institution or a home are included in the HICP but not in the CPI. 

Population

There is an important difference in the consumers as referred to by the CPI and the HICP.

The CPI includes all spending by consumers residing in the Netherlands, regardless of whether that spending takes place in the Netherlands or abroad.

The HICP includes all spending within the Netherlands. This means that spending by Dutch consumers abroad is excluded, but spending by foreign visitors in the Netherlands is included in the HICP.

Price definition

For some product groups, the HICP uses a different price definition than the CPI.

The CPI includes the gross price of childcare, but the HICP only includes the parents' own contribution. The contribution granted to parents by the State is deducted from the gross price in the HICP.

Changes in co-payment for basic health insurance are also treated differently. If part of the care disappears from the basic insurance and the consumer has to pay for that care, this only leads to an increase in the weighting for care in the CPI. It is not a price increase. Conversely, the inclusion of previously uninsured care in the basic insurance does not lead to a price drop in the CPI. The HICP does treat these changes in the basic insurance as a price change.

Classification

The classification for goods and services used is the ECOICOP. ECOICOP stands for European Classification of Individual Consumption by Purpose. This classification is used for the HICP and has been extended for the CPI in order to accommodate the above differences.

The CPI includes the following groups which are not included in the HICP:

  • COICOP 042100 Imputed rentals of owner-occupied dwellings;
  • COICOP 094130 Contribution to sports and leisure associations;
  • COICOP 130000 Consumption-related taxes;
  • COICOP 140000 Consumption abroad.

The HICP contains one group that is not included in the CPI:

  • COICOP 124020 Care homes for elderly and disabled people