An HICP for the United States

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An HICP for the United States

• Comparing inflation between United States and
  Europe Using the Methods of the European Unions
  Harmonized Index of Consumer Prices
• Walter Lane and Mary Lynn Schmidt
• U.S. Bureau of Labor Statistics

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Acknowledgements

• The authors wish to thank
• John Greenlees for his critical review
• Rob Cage, Joshua Klick and Cam Taylor for
  providing the expenditure weights
• Lyubov Rozenthal for performing the index
  calculations
• Susan Fleck, Mary Jablonski, Ronald Johnson,
  John Layng, Wodolar Lysko and Jessica Sincavage
  for editing.
• The results remain the responsibility of the
  authors and not the Bureau of Labor Statistics.

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Data

• US HICP\\CPISRV3\Dcppi\Harmonized_Index_of_Consu
  mer_Prices__Foreign_CPIs
• EU HICP
• http//epp.eurostat.cec.eu.int/portal/page?_pageid
  0,1136173,0_45570701_dadportal_schemaPORTAL

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Experimental BLS series

• As opposed to official series
• Produced outside regular production systems
• Less than full production quality
• Not produced until after the publication
  of corresponding official statistics
• For security reasons

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Why HICP ?

• International comparability
• Inflation rates
• Deflated series
• National CPIs OK for domestic purposes
• Indexation of payments
• Visit to EUROSTAT in 2002
• John Astin, then head of consumer prices
• HICP Manual

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An Experimental Consumer Price Index for the
United States

• January 1998 forward
• follows HICP methods to the extent possible
• includes the rural population
• expanded the CPIs population coverage to the
  whole population
• excludes owner-occupied housing
• narrowed the CPIs item coverage to remove
  owner-occupied housing
• experimental vs. official BLS Statistics
• produced outside of its regular production system
  
• less than full production quality
• after the publication of the corresponding
  official statistics
• available from the authors on request

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European Union

• Until April 2004
• TheEU15
• Austria
• Belgium
• Denmark
• Germany
• Greece
• Finland
• France
• Ireland
• Italy
• Luxembourg
• the Netherlands
• Portugal
• Spain
• Sweden
• the United Kingdom.

• On May 1, 2004ten additional countries
• The EU25
• Cyprus
• the Czech Republic
• Estonia
• Hungary
• Latvia
• Lithuania
• Malta
• Poland
• Slovakia
• Slovenia

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European Monetary Union (EMU)

• The Euro-zone,
• EU15 except
• Denmark
• Sweden
• the United Kingdom
• Between 2006 and 2010The 10 countries that
  joined in 2004 will
• join the EMU
• adopt the Euro
• The European Central Bank (ECB)
• Manages the Euro
• Uses the HICP

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CPI-U

• Official U.S. CPI
• CPI for All Urban Consumers
• 87 of the US population
• Metropolitan areas
• Small urban places (Micropolitan areas)
• Excludes
• Rural 11 of U.S. population
• Institutional population 2
• Prisoners
• Nursing home residents
• Military living on bases

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CPI-XR

• Experimental index for the (non-institutional) ru
  ral population
• Jan 02 onward
• 13 of the US pop
• 11 of spending
• Weights
• from Consumer Expenditure Surveys
• for rural population
• Price movement
• from small urban areas

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CPI-XT

• Experimental index for (non-institutional)
  total population
• Jan 02 onward
• 98 of the US population
• CPI-XT CPI-U CPI-XR

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U vs. XR vs. XT Dec 01 to Dec 05
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US HICP

• Removed weights for
• Owners equivalent rent of primary residence
• Owners equivalent rent of secondary
  residences(part of the Lodging while out of town
  stratum)
• Restored the weights of
• Home maintenance and repairs
• appliance purchases and repairs

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Biennial Weights (Relative Importances) for
CPI-U, CPI-XR, CPI-XT and HICP 2001-2002
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Other Differences Between European and US
Methods

• geometric formula for most US elementary
  aggregates
• tends to rise more slowly than Dutot(HICP allows
  either Dutot or Jevons formula)
• quality adjustments for changes in consumer
  products
• introduce new products
• differences in the public/private divide
• Medical care
• Education
• Have much larger importance in the US indexes
• Household and vehicle insurance
• Europe premiums-net-of-reimbursements
• US gross premiums (net reimbursements from
  expenditures)

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CPI-U vs. HICP Dec 97 to Dec 05
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• Harmonized index of consumer prices for
  selected countries and areas,
• percent
  change from same period of previous year,
  2003-2006
• -----------------------------
  --------------------------------------------------
  ------------------------------
• United
  European European
  United
• Period States
  Japan Union-25 Union-15 France Germany
  Italy Kingdom
• 
  (1) (2) (3)
  
• -----------------------------
  --------------------------------------------------
  ------------------------------
• 2003 2.3
  -0.3 1.9 2.0 2.2
  1.0 2.8 1.4
• 2004 2.8
  0.0 2.1 2.0 2.3
  1.8 2.2 1.3
• I 1.7
  -0.1 1.7 1.7
  2.0 1.0 2.3 1.3
  
• II 3.0
  -0.4 2.3 2.3 2.6
  1.9 2.3 1.4
• III 2.8
  -0.1 2.3 2.3 2.4
  2.0 2.3 1.3
• IV 3.7
  0.6 2.3 2.3 2.3
  2.2 2.2 1.4
• 2005 3.9
  -0.4 2.2 2.1 1.9
  1.9 2.2 2.0
• I 3.2
  -0.1 2.1 2.1
  1.9 1.7 2.0 1.7
  
• II 3.3
  -0.1 2.0 2.0
  1.8 1.6 2.2 1.9
• III 4.6
  -0.4 2.3 2.3
  2.1 2.1 2.2 2.4
  
• IV 4.3
  -0.8 2.3 2.3
  1.8 2.2 2.4 2.1

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Two-Digit Classification of Individual
Consumption by Purpose

• 01 Food and non-alcoholic beverages
• 02 Alcoholic beverages, tobacco and narcotics
• 03 Clothing and footwear
• 04 Housing, water, electricity, gas and other
  fuels
• 05 Furnishings, household equipment and routine
  maintenance of the house
• 06 Health
• 07 Transportation
• 08 Communication
• 09 Recreation
• 10 Education
• 11 Hotels, cafes and restaurants
• 12 Miscellaneous goods and services

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Whats in USH12?

• Legal services
• Funeral expenses
• Financial services
• Motor vehicle insurance
• Jewelry and watches
• Personal care products
• Personal care services
• Household paper products

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Expenditure weights, selected countries,
two-digit level
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Expenditure weights, selected countries,
two-digit level
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Compare Price Change, EU25 and US HICP sub
indexes, Dec 98 to 2005

• US
  EU25
• All Items 19.2 16.6
• 02 Alcohol and tobacco 38.3 31.6
• 04 Housing 36.9 27.1
• 06 Health 32.7 27.3
• 07 Transportation 21.4 24.1
• 10 Education 50.9 32.8
• 12 Miscellaneous goods 23.0 30.0
• and services

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Comparison all items, selected countries,
Dec 1998-2005
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12-month change selected countries, December
1998-2005
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Selected comparisons of two-digit indexes
RI EU25 USH 02 44.8 19.2
RI EU25 USH 04 145.7 134.2
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Selected comparisons of two-digit indexes
RI EU25 USH 06 38.4 78.5
RI EU25 USH 10 11.1 31.9
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Selected comparisons of two-digit indexes
RI EU25 USH 07 149.9 202.6
RI EU25 USH 12 86.5 92.2
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EU25 selected 2-digit indexes, Dec 1998-2005
Alcohol and tobacco
Alcohol and tobacco
Transport
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US HICP selected 2-digit indexes, Dec 1998-2005
Education
Transportation
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US HICP 2-digit indexes, Dec 1997-2005
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US HICP 2-digit indexes, Dec 1997-2005
Education
Housing
Transportation
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Alcohol and tobacco, selected countries, Dec
1998-2005
France
US
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Education, selected countries, Dec 1998-2005
US
Sweden
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Expenditure weights, selected countries,
two-digit level
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Background highlights

• Classification Of Individual COnsumption by
  Purpose (COICOP) 2-digit level
• US HICP, EU25, and selected countries
• Comparison
• All items
• Selected Major Groups/Divisions
• Expenditure weights /
• relative importances

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Background highlights

• Classification Of Individual COnsumption by
  Purpose (COICOP) 2-digit level
• US HICP, EU25, and selected countries
• Comparison
• All items
• Selected Major Groups/Divisions
• Expenditure weights /
• relative importances

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Background highlights

• Classification Of Individual COnsumption by
  Purpose (COICOP) 2-digit level
• US HICP, EU25, and selected countries
• Comparison
• All items
• Selected Major Groups/Divisions
• Expenditure weights /
• relative importances

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Expenditure weights, selected countries,
two-digit level
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Dec. 1997 through Dec. 2005percent change