Consumer prices - inflation


Data extracted in July 2018.

Planned update: July 2019.

Highlights

While the lowest annual EU inflation rates since records began in 1997 were recorded during the period 2014-2016, there was a somewhat faster rate of change in 2017 as consumer prices increased by 1.7 %.

Consumer prices in the United States followed a broadly similar pattern of developments to those observed in the EU during recent years, with an identical inflation rate in 2017 (both 1.7 %).

In 2017, the highest annual inflation rates among EU Member States were recorded in the Baltic Member States (Estonia and Lithuania, 3.7 %; Latvia, 2.9 %).

In 2017, the highest annual price increases in the EU were recorded for transport (up 3.2 %) and for restaurants and hotels (up 2.5 %).

Consumer price developments, 2007-2017

Inflation is the increase in the general level of prices of goods and services in an economy; the reverse situation is deflation when the general level of prices falls. Inflation and deflation are usually measured by consumer price indices or retail price indices. Within the European Union (EU), a specific consumer price index has been developed — the harmonised index of consumer prices (HICP). Other factors (such as wages) being equal, inflation in an economy means that the purchasing power of consumers falls as they are no longer able to purchase the same amount of goods and services with the same amount of money.

Full article

Inflation: price changes over time

The average annual inflation rate of the EU (based on an index using a changing aggregate reflecting EU membership) stayed within the range of 1.2 % to 2.3 % during the period from 1997 (the beginning of the time series) to 2007. In the run-up to the global financial and economic crisis and in its immediate aftermath there was considerable volatility in food and energy price developments which led to broad changes in inflation rates. In the EU, average annual inflation peaked at 3.7 % in 2008 with relatively sharp annual movements during the period 2008-2012 (see Figure 1). EU inflation subsequently decreased and there was no overall change in price levels (0.0 %) in 2015. The latest information available for 2016 and 2017 indicates that consumer prices in the EU started to rise again, with the average annual inflation rate increasing from 0.3 % in 2016 to 1.7 % in 2017. As such, while the lowest EU inflation rates were recorded during the period 2014-2016, inflation accelerated in 2017.

The overall change in the HICP in the EU during the period 2007-2017 was 17.7 %, equivalent to an annual average of 1.6 %. Figure 1 shows consumer price developments for a number of international comparisons: while price changes in Japan were generally lower than in the EU, they were broadly similar in the United States and somewhat higher in China. During the period 2007-2017, consumer prices rose by an annual average of 8.0 % in India, 2.6 % in China, 1.6 % in the United States and 0.3 % in Japan.

Figure 1: HICP all-items, development of the annual average inflation rates, 2007-2017
(%)
Source: Eurostat (prc_hicp_aind) and OECD (G20 — CPI All items)

Among the EU Member States, Latvia, Lithuania, Hungary and Estonia registered some of the highest overall increases in the HICP between 2007 and 2017 (in the range of 30-35 %), while the highest increase was recorded in Romania (where the HICP rose by 38 %). By contrast, Ireland experienced the lowest price increases during the same period, its HICP rising by 4 %. There were nine Member States with similar price developments, as consumer prices in Cyprus, Greece, Portugal, France, Germany, Spain, Sweden, the Netherlands and Denmark rose by 12-15 % overall from 2007 to 2017.

Looking in more detail at the latest annual rates of change for the HICP (see Table 1), consumer prices rose by as much as 3.7 % in 2017 in both Estonia and Lithuania, while the next highest increase was recorded in the other Baltic Member State of Latvia (2.9 %). At the other end of the range, the lowest annual price increases in 2017 were recorded in Finland (0.8 %), Cyprus (0.7 %) and Ireland (0.3 %).

Table 1: HICP all-items, annual average inflation rates, 2007-2017
(%)
Source: Eurostat (prc_hicp_aind)

Inflation rates by product

As regards the main components of the HICP, the price of alcoholic beverages and tobacco as well as the price of education rose most rapidly across the EU during the period 2007-2017 (46 % and 39 % respectively). By contrast, the price of communications in the EU during the period 2007-2017 fell by 10 % overall, while there were only small changes in the price of clothing and footwear (2 %) or recreation and culture (5 %); all of the remaining main components of the HICP recorded double-digit price increases during this period.

Looking at the latest annual developments (see Figure 2), consumer prices of transport continued to rise in 2017, by an average of 3.2 % in the EU. At the other end of the spectrum, the price of communications fell by 1.1 % in 2017, the only heading to record a negative annual average rate of change.

Figure 2: HICP main headings, annual average inflation rates, EU-28, 2017
(%)
Source: Eurostat (prc_hicp_aind)

Source data for tables and graphs

Data sources

The HICP is an index for measuring, over time, the change in prices of consumer goods and services acquired by households in monetary transactions. Certain categories of consumption expenditure are excluded from the HICP on the grounds that they pose practical problems for price collection, do not represent monetary transactions, or do not yet have a harmonised method of treatment. These include, for example, narcotics, owner-occupied housing and games of chance.

Goods and services are classified according to the European classification of individual consumption by purpose. At the most disaggregated level currently available, Eurostat publishes around 400 sub-indices for consumer prices. The annual inflation rate measures the change of the index between one month and the same month of the previous year, and the monthly rate compares indices between two consecutive months.

The indices are compiled according to a common approach, providing comparable measures of consumer price changes across countries, as well as for different country groupings, namely: the euro area, the European Union, and the European Economic Area (which includes the EU Member States plus Iceland and Norway).

HICPs have a common reference year (currently 2015 = 100). Normally the indices are used to calculate percentage changes that show price increases/decreases. Although the rates of change shown in the tables and figures for this article are annual averages, the basic indices are compiled and published on a monthly basis. Since October 2001, a flash estimate of the euro area inflation rate has been published at the end of each reference month. This estimate is replaced in the middle of the following month once a full set of data is available.

Context

The HICP is used for measuring inflation in the euro area; the primary objective of the European Central Bank’s (ECB) monetary policy is to maintain price stability. The ECB has defined price stability as a year-on-year increase in the HICP for the euro area of below, but close to 2 % over the medium-term.

HICPs are also used for the purposes of monetary policy and assessing inflation convergence as required in the Treaty on the functioning of the European Union among other uses.

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HICP (2015=100) - monthly data (index) (prc_hicp_midx)
HICP (2015=100) - monthly data (annual rate of change) (prc_hicp_manr)
HICP (2015=100) - monthly data (monthly rate of change) (prc_hicp_mmor)
HICP (2015=100) - monthly data (12-month average rate of change) (prc_hicp_mv12r)
HICP (2015=100) - annual data (average index and rate of change) (prc_hicp_aind)
Contributions to euro area annual inflation (in percentage points) (prc_hicp_ctrb)
HICP - country weights (prc_hicp_cow)
HICP - item weights (prc_hicp_inw)
HICP - administered prices (composition) (prc_hicp_apc)
HICP at constant tax rates (prc_hicp_ct)
HICP at constant taxes - monthly data (index) (prc_hicp_cind)
HICP at constant taxes - monthly data (annual rate of change) (prc_hicp_cann)
HICP at constant taxes - monthly data (monthly rate of change) (prc_hicp_cmon)