(1)

Harmonised Indices of Consumer Prices (HICP) are harmonised inflation figures required by the Commission and the European Central Bank for the performance of their functions under Article 121 of the EC Treaty. HICPs are designed to facilitate international comparisons of consumer price inflation. They serve as important indicators for the management of monetary policy.

(2)

The HICP constitutes a rather complete conceptual framework. Very considerable progress has been made in harmonizing methodologies since the initial implementing measures were adopted, but scope for non-comparability remains with regard to sampling, replacement, quality adjustment and aggregation procedures.

(3)

The existing HICP framework provides a definition of the HICP as a Laspeyres-type index concerned with the changing power of money to acquire goods and services for the purposes of directly satisfying consumer needs. This definition reflects the current understanding of consumer inflation in the European Union and the euro zone in particular.

(4)

The HICP relates to the prices of all the products purchased by consumers, when they seek to maintain consumption patterns, i.e. products defined by elementary expenditure categories (weights). These categories consist of explicitly stated consumption segments distinguishable by consumption purpose. The set of all product-offers in the statistical universe can be exhaustively divided into consumption segments. Consumption segments are relatively stable over time although the product-offers comprising a consumption segment will change as markets evolve.

(5)

The notion of consumption segments by purpose is therefore central to sampling and to the meaning of quality change and quality adjustment. However, an ambiguity in this concept concerns the level of aggregation at which it is defined and applied.

(6)

The range of product-offers will change over time as products are modified or replaced by retailers and manufacturers. The HICP requires the representation of all currently available product-offers within the consumption segments by purpose selected in the reference period in order to measure their impact on inflation. This applies particularly to new models or varieties of previously existing products.

(7)

Quality change thus relates to the degree to which available products are fit to serve the purpose of the consumption segment to which they belong. Quality change should be assessed by reference to the specification of concrete products within a consumption segment.

(8)

In order to address these issues, a number of clarifications and amendments to Commission Regulation (EC) No 1749/96 of 9 September 1996 on initial implementing measures for Council Regulation (EC) No 2494/95 concerning harmonized indices of consumer prices (3) are necessary for ensuring comparability of HICPs and maintaining their reliability and relevance in accordance with Article 5 of Regulation (EC) No 2494/95.

(9)

It is therefore necessary to further specify the purposes and definition of the HICP, to clarify where those determine the actual practices of sampling, replacement, and quality adjustment, and to establish the required representation of the HICP and its form, and to establish further minimum standards with respect to sampling, replacement, quality adjustment and aggregation procedures.

(10)

In particular, it is necessary to set a clear statistical target for the purposes of sampling, replacement and quality adjustment and ensure that the HICP measures close to the target, with a reasonably small uncertainty or error in terms of bias and variance. A trade-off between unbiasedness and precision must be considered.

(11)

With a view to further specifying the target universe of the HICP and resolving the issue of the ‘fixity’ of the HICP basket, the concept of ‘consumption segments by purpose’ offers a workable solution as it can build the necessary fixity into the Laspeyres-type index and make the concept meaningful in a world of evolving markets.

(12)

It is necessary to ensure that consumption segments in the reference period are selected to represent the entire partition of the transactions universe and that replacements maintain the representation of current product offers within consumption segments already represented in the HICP. The representation of household final monetary expenditure by consumption purpose should reflect the dynamic nature of evolving markets.

(13)

It must be ensured that judgements by Member States on whether quality change occurs are based on evidence of differences in price determining characteristics that are relevant to the consumer purposes in question. To this effect specific quality adjustment standards should be developed by the Commission (Eurostat) on a case-by-case basis.

(14)

Furthermore, it is necessary to broaden the definition of elementary aggregates and to further harmonise aggregation and replacement practices within elementary aggregates.

(15)

The principle of cost-effectiveness has been taken into account in accordance with Article 13 of Regulation (EC) No 2494/95.

(16)

Regulation (EC) No 1749/96 should therefore be amended accordingly.

(17)

The measures provided for in this Regulation are in accordance with the opinion of the Statistical Programme Committee, established by Council Decision 89/382/EEC, Euratom (4),

1.

Article 2 is replaced by the following:

(*1)   OJ L 340, 11.12.1997, p. 24.’ "

2.

The following Article 2a is inserted:

3.

In the second paragraph of Article 4 the words ‘Article 2(b)’ shall be replaced by the words ‘Article 2(5)’.

4.

Article 5 is replaced by the following: