Analytics, Inflation, Lithuania, Markets and Companies

In March 2014, annual inflation (March 2014, against March 2013) calculated based on the HICP stood at 0.4%and was by 0.2 percentage points higher than that calculated according to the consumer price index (CPI).

Average annual inflation calculated based on the HICP

Overall monthly (March 2014, against February) change in prices for consumer goods and services calculated based on the HICP stood at 0.4% and coincided with that calculated based on the CPI.

The value of average annual inflation calculated based on the HICP was by 0.1 percentage points higher than the CPI-based one.

Table 1. Rates of change in prices for consumer goods and services calculated based on the HICP, March 2014

_________________
¹ The Classification of Individual Consumption by Purpose (COICOP) adapted to the needs of Harmonized Index of Consumer Prices (HICP).

For the calculation of annual and average annual inflation, monthly and other period's price changes, the HICPs calculated based on the 2005 index reference period (2005 = 100) accurate to two decimal places are used. Price indices are published accurate to two decimal places, inflation and price changes – to one decimal place.

Table 2. COICOP/HICP classes of consumer goods and services whose rates of change in prices had the biggest impact on the overall price change

The overall change in consumer prices is influenced not only by the size of price change of a certain product but also by the relative share of expenditure on that product in the total consumption expenditure.

Differences between the HICP and the CPI

Purpose. The HICP is an instrument for measuring inflation in the EU and making international comparisons, as well as for the compilation of the European index of consumer prices (covering 28 EU member states), Monetary Union index of consumer prices (covering 18 EU member states belonging to the euro area: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain), and the European Economic Area index of consumer prices (covering 28 EU member states, Iceland and Norway). The extent to which a country fulfils the price stability criterion established in Article 140 of the Treaty on the Functioning of the European Union is measured taking into consideration the inflation rate calculated based on the HICP.

The CPI is used to measure the inflation rate in the country; it is the key instrument for indexation.

Coverage. The HICP, alongside consumption expenditure incurred by the residents of the country, covers consumption expenditure incurred by non-residents and visitors from abroad within the economic territory of the country. The CPI covers consumption expenditure incurred only by the residents of the country within the economic territory of the country. The HICP does not cover household expenditure on games of chance and financial intermediation services, while the CPI does cover them.

Weights. Due to a different coverage of consumption expenditure, weighting systems used for the HICP and CPI compilation differ. This is the primary factor leading to differences in index values.

Classification. For the calculation of the CPI, the Classification of Individual Consumption by Purpose (COICOP) is used. The Classification of Individual Consumption by Purpose adapted to the needs of HICPs has been adjusted for the calculation of the HICP.

Concepts

Inflation is a decrease in the purchasing power of a currency unit, which manifests itself in a long-term growth in the general average price level.

Annual inflation shows the relative change in the average price level in the reporting month and the corresponding month of the previous year.

Average annual inflation shows the relative change in the average price level in the last twelve months and the corresponding previous twelve months.

Harmonized index of consumer prices – a consumer price index compiled according to a methodology harmonised across the European Union.

Consumer price index – a relative indicator reflecting the overall change in prices for consumer goods and services purchased by households to satisfy their consumption needs over a certain period of time.