Inflation

To describe the different types of products that are used to calculate the harmonised index of consumer prices in the EU, statisticians use the European classification of individual consumption by purpose (ECOICOP). This is a comprehensive list that includes every type of goods and services, divided into 13 divisions or categories.

As statistical offices cannot afford to constantly monitor the price of every single product, they select items for each category that are representative of households’ expenditure and monitor any changes in the price. To obtain reliable data at different times, these individual items must be precisely defined. It is not enough to simply measure the price of a carton of juice: you also need detailed information about the size of the carton, the manufacturer and the particular type of juice (its ingredients). For the complete picture, you also need to know where the juice is bought.

 Example

If Markus buys a chocolate bar from a late-night store, he expects to pay more than in a discount supermarket. This is why it is important to also consider the choice of the shop or outlet when measuring the price, and not just the choice of items.

The items must be carefully selected to be genuinely representative of what people buy and the conditions under which they buy them. The selected items whose prices are surveyed each month make up the reference shopping basket of goods and services. The ‘shopping basket’ of items is reviewed each year to ensure it remains relevant. Some items are removed, and others are put in, to ensure it is up to date and representative of consumer spending patterns.
 

Every month, national statistical offices record the prices of the items in the ‘shopping basket’, making sure they collect prices from the different regions and different types of shops in their country. These prices are collected through price surveys, often by visiting shops and service providers and recording the price. In some cases, prices may be collected directly by telephone or by looking on websites for example, at the price of an air fare.

Once the prices for each item in the ‘shopping basket’ have been collected, the index is calculated as follows:

Check price change and get the index: The latest prices are compared with previous prices to see how they have changed. For example, if in a particular month the price of a specific item is 10% higher than the price in the reference period, the indexed value will be 110, while if the price is 5% lower than the index is 95.

Calculate average for items in the same category: After the index has been created, an average of the indices used for the same category of products must be calculated. For example, all indices for fruit will be combined to produce a price index for fruit.
 

Each good or service has a different significance (or weight) in terms of the money spent by consumers, who are considered as separate households. Each item in the basket is assigned a weight based on its share of total consumer expenditure. These weights reflect how much of the average household's budget is spent on each category. To obtain an overview of the total changes in prices of goods and services each change must be given an importance relative to the entire household's expenditure. Price changes are weighted according to the relative expenditure on these goods and services.

As consumers are different from one another, they spend their money in different ways, according to their income and habits. Some households will spend more on food, while others will spend more on clothing, heating, or vehicles. If these differences for every household in a country are added together, we can see the relative importance – the weight – of each product category in that country. Of course, consumption patterns differ from country to country, therefore the set of country weights will also be different.

 Example

While Markus in Germany likes to buy vegetables and cheese from the supermarket as part of his grocery shopping, Giulia in Italy prefers to purchase fruit, meat and pasta.

While Annika in Sweden spends a high share of her money on heating her flat, Miguel in Spain spends a greater share of his money on electricity for air conditioning and water for the vegetables he grows in his garden.

Tastes, products and prices change over time. For this reason, weights are updated every year.
 

Finally, the indices for the different product categories are weighted to arrive at the harmonised index of consumer prices. 

The weights indicate how much of the total household expenditure is spent on each type of product. The weights are shown as a value which, when all of the weights for divisions 01 to 13 have been put together, equals 1 000. In other words, these weights are calculated like percentages except that the total adds up to 1 000 rather than 100, using per mille (‰) symbol and not the percentage (%) one.

 Example

In Belgium petrol represents 12‰ of consumer expenditure in 2025 which means the index for petrol will add 12‰ to the overall index in Belgium. While in Hungary the petrol represents 64‰ of consumer expenditure in 2025, so 64‰ will add to the overall index in Hungary.

By adding up the different weights, we create an overall index commonly referred to as the all-items index.