Current Price Topics

Measuring U.S. Inflation 

Using European Methods

1

Consumer Price Index: Second Quarter 2010

U.S. Bureau of Labor Statistics August 2011 Volume 2, Number 7

Common international standards for producing economic statistics—such as the 

measures of inflation—are important for the 

increasingly integrated world economy. This 

is particularly true for the 27 countries1 of the 

European Union (EU) whose economies now 

are a single market, and it is even more critical for the 17 EU countries2

 of the Eurozone 

that replaced their own monetary units with 

the euro. Consequently, the EU requires each 

member country and prospective member 

country to produce standardized (harmonized in euro-speak) economic statistics. The 

EU's statistical agency, Eurostat, develops the 

standards in consultation with the statistical 

agencies of the EU member states. 

The Harmonized Index of Consumer Prices 

(HICP)

3

 is Eurostat's standard consumer price 

index. Eurostat chose this name to distinguish the HICP from the old consumer price 

indexes; many European statistical offices 

continue to produce their countries' traditional CPIs for historical continuity and for 

internal purposes, such as adjusting pensions. 

These statistical offices now also produce 

HICPs for their respective countries. Eurostat 

averages4 the national HICPs to produce the 

multinational HICPs, including the European 

Index of Consumer Prices (EICP), the aggregate 

HICP for the entire EU. Eurostat also produces 

average HICPs for other European areas and 

country groups, such as the Eurozone. Eurostat publishes these HICPs in its monthly press 

release.5 The European Central Bank (ECB), the 

monetary authority that regulates the euro, is 

a primary user of the HICP. The ECB uses the 

HICP to formulate Eurozone monetary policy. 

Some countries outside of Europe also calculate an HICP for the ECB and for their own use. 

The U.S. Bureau of Labor Statistics (BLS) has 

been producing a US-HICP6 as an experimental index7

 since 2006. 

The U.S. HICP differs from the official U.S. 

CPI—in two major respects: population coverage and the treatment of owner-occupied 

housing. The CPI-U's target population is 

urban consumers, noninstitutional residents 

of metropolitan areas and urban places in the 

United States; their consumption expenditures are the basis for the CPI-U weights. On 

the other hand, Eurostat specifies that HICP 

targets a country's total population: rural as 

well as urban. BLS was able to expand the 

population coverage for the US-HICP to the 

total (noninstitutional) U.S. population, because the Consumer Expenditure Survey (CE), 

which is the source for the CPI weights, covers 

rural areas. As the CPI does not collect prices 

in rural areas, the US-HICP uses the price 

movement of non-metropolitan urban places 

in each of the four census regions to stand in 
2

 CURRENT PRICE TOPICS

for rural price change in each region. (BLS was 

not able to add the institutional population, 

which consists largely of residents of prisons 

and nursing homes; but this population's 

expenditures are very low, so this probably is 

not a serious omission.8)

The second difference between the U.S. CPI-U 

and an HICP is in the treatment of owneroccupied housing, which is subject to different conceptual approaches in various price 

indexes. The US-CPI-U uses a rentalequivalence approach, which uses market 

rents to impute owners' shelter costs. Although this has become a common approach 

internationally, two other alternatives are 

used, as well. The acquisitions approach regards houses as comparable to other durable 

goods and uses their purchase price in the 

index. The other alternative is the user-cost

approach in which the conceptual objective 

is to estimate the cost of producing shelter 

services for the occupant. The Europeans were 

unable to agree on a conceptual approach 

for the HICP, and so Eurostat decided that for 

now their consumer price index would omit 

owner-occupied housing. 

Table 1 compares inflation rates for the 9 years 

for which we have US-HICP results. Note that, 

over this period, the US-HICP, which excludes 

owner-occupied housing, rose more than the 

official CPI-U, which includes this housing. 

Both U.S. series show that the United States 

has experienced greater price volatility than 

Europe, particularly in the last 4 years. The 

great U.S. price volatility is largely attributable to differences in the pricing and usage 

of motor fuel. The motor fuel component has 

more weight9 in the United States, reflecting 

its much greater usage. At the same time, 

motor fuel's percent price change is smaller in 

Europe where the consumption tax is a larger 

portion of fuel's price to consumers.

All items

The all items Consumer Price Index for All 

Urban Consumers (CPI-U) increased at a 1.5-

percent seasonally adjusted annual rate 

(SAAR) during the second quarter of 2011. 

(See chart 1.) For the first 6 months of 2011, 

the index rose at a 3.8-percent SAAR. This 

compares with an increase of 1.5 percent in 

2010.

Decelerations in the energy and food indexes 

offset an acceleration in the index for all items 

less food and energy, leaving all items increasing at a slower pace than that of the first 

quarter of 2011. The indexes for energy, food

and all items less food and energy all rose in 

2010 and have increased more rapidly so far 

in 2011, with the index for all items rising at 

more than double the pace of its 2010 increase.

Energy

Energy declined at a 12.5-percent SAAR in 

Current Price Trends

All Items Less Food and

Energy Pushes Retail

Inflation
3

 CURRENT PRICE TOPICS

the second quarter of 2011 after rising at a 

42.4-percent rate in the first quarter. For the 

first 6 months of 2011, the energy index has 

climbed at an 11.6-percent SAAR, following a 

Table 1. The HICP; annual change from previous year and 9-year change

Year Eurozone

(17 countries)

European Union 

(EU)

(27 countries)

US-HICP CPI-U

2002 2.3 2.1 2.2 1.6

2003 2.1 2.0 2.3 2.3

2004 2.2 2.0 2.8 2.7

2005 2.2 2.2 3.9 3.4

2006 2.2 2.2 3.2 3.2

2007 2.1 2.3 2.6 2.8

2008 3.3 3.7 4.4 3.8

2009 0.3 1.0 –0.9 –0.4

2010 1.6 2.1 2.5 1.6

2001–2010 19.8 21.4 24.8 23.1

NOTE: All figures are calculated from annual averages, except the 2002 and 2001–2010. The US-HICP figures are calculated from 

 December 2001. 

SOURCE: U.S. Bureau of Labor Statistics. 

7.7-percent increase in all of 2010.  Within the 

energy component, the gasoline index fell at 

a 20.5-percent SAAR in the second quarter of 

2011, after advancing at a rate of 71.2 percent 

1.5 1.5

7.7

0.8

6.1 7.5

42.4

1.5 2.0 4.1

-12.5

2.9

-20

-10

0

10

20

30

40

50

All items Food Energy All items less food and 

energy

Percent change

2010 change, not seasonally adjusted

2011 1st quarter change, seasonally adjusted annual rate

2011 2nd quarter change, seasonally adjusted annual rate

Chart 1. CPI-U percent changes: All items, food, energy, and all items less 

food and energy for 2010, and first and second quarter 2011

SOURCE: U.S. Bureau of Labor Statistics
4

 CURRENT PRICE TRENDS

during the first quarter. The gasoline  index 

increased 13.8 percent in 2010. 

The household energy index also turned 

down in the second quarter of 2011, slipping 

0.1 SAAR, after rising at a 7.2-percent rate 

in the first quarter. The electricity index was 

the major cause of the downturn, falling at a 

2.2-percent rate in the second quarter following a 2.7-percent SAAR increase in the first 

quarter. The natural gas index increased at an 

8.0-percent SAAR in the second quarter, after 

rising at a 3.3-percent rate in the first quarter 

of 2011. The index for fuel oil significantly 

slowed its rate of increase to 0.3 percent in

the second quarter of 2011, from a 106.9-

percent rate in the first quarter. For the first 

half of 2011, the household energy index 

climbed at a 3.5-percent SAAR. All three of its 

major components contributed to the move, 

with the fuel oil index increasing the fastest, 

at a rate of 44.1 percent. The natural gas index 

(5.6-percent SAAR) and the electricity index 

(0.2-percent SAAR) also contributed positively 

to the household energy increase during the 

first half of 2011.

Crude oil prices continued to be volatile during the second quarter of 2011, peaking at 

$116.53 per barrel in late April.10 Correspondingly, gasoline prices have risen, increasing 

35.6 percent from June 2010 to June 2011. 

The April 2011 peak in crude oil prices remains below the July 2008 peak of $134 a 

barrel. Similarly, gasoline prices remain below 

their 2008 peak so far this year.

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J

2009 2010 2011

Percent change

All items All items less food and energy

Chart 2. Twelve-month percent change, all items and all items less food and 

energy, January 2009–June 2011 

SOURCE: U.S. Bureau of Labor Statistics
5

 CURRENT PRICE TRENDS

Food

Food prices rose at a 4.1-percent SAAR in 

the second quarter of 2011, after rising at a 

7.5-percent rate in the first quarter. The food 

index rose 1.5 percent in 2010. The food at 

home index slowed in the second quarter of 

2011 to a 4.7-percent SAAR, after rising at a 

rate of 11.2 percent in the first quarter.  Of the 

six major food at home groups, only the fruits 

and vegetables index fell in the second quarter, declining at a 10.2-percent SAAR, after 

rising at a 23.3-percent rate in the first quarter.  

Apples (−8.0 percent), oranges (−10.9 percent), lettuce (−48.8 percent), and tomatoes

(–63.4 percent) all contributed to the decline 

in the fruits and vegetables index. The other 

grocery store food indexes increased in the 

second quarter. Dairy and related products led 

the way with a 12.4-percent rate of increase, 

a modest acceleration from the first quarter 

SAAR of 8.4 percent. Milk (17.0 percent) and 

cheese (16.9 percent) each had a major influence on the rise in dairy and related products. 

Meats, poultry, fish and eggs increased at a 

9.0-percent SAAR, a deceleration from the 

13.5-percent SAAR posted in the first quarter of 2011. The cereals and bakery products

index accelerated in the second quarter, increasing at a 7.1-percent SAAR after posting a 

5.7-percent rate of increase in the first quarter.  

Nonalcoholic beverages and beverage materials (6.3 percent) and other food at home (5.1 

percent) both slowed from their first quarter 

rates of 10.4 percent and 7.1 percent, respectively. 

Food away from home rose at 3.2-percent rate 

in the second quarter, after rising at a 2.8-percent SAAR rate in the first quarter of 2011. 

The food away from home index has risen 2.3 

percent over the past year, almost double the 

1.2-percent increase of June 2009 through 

June 2010.

All items less food and energy

The index for all items less food and energy

rose at a 2.9-percent rate in the second 

quarter of 2011, a slightly faster rate than its 

2.0-percent SAAR in the first quarter. (See 

chart 2.) The shelter index accelerated in the 

second quarter, rising at a rate of 1.9 percent, 

after increasing at a 1.3-percent SAAR in the 

first quarter. Within shelter, rent  rose at a 

1.7-percent SAAR in the second quarter, after 

a 1.2-percent rate of increase in the first quarter. Owners’ equivalent rent rose at a 1.3-

percent SAAR in both quarters of 2011. 

Lodging away from home  advanced at a 

25.8-percent rate in the second quarter of 

2011, after falling in this year’s first quarter.

Several other indexes rose at double digit 

rates in the second quarter, including new 

vehicles (10.1 percent), used cars and trucks

(16.8 percent), and apparel (11.5 percent). On 

the other hand, the airline fare index declined 

at a double-digit rate, falling at a 14.9-percent 

SAAR during the second quarter of 2011, after 

increasing at a 28.0-percent in the first quarter. Tobacco also fell in the second quarter, 

declining at a 0.9-percent rate, after rising at a 
6

 CURRENT PRICE TRENDS

1.5-percent rate in the first quarter. 

The household furnishings and operations

index increased at a rate of 1.4 percent in the 

second quarter after a 0.2-percent SAAR in 

the first quarter of 2011. Medical care, which 

rose at a 2.9-percent rate in the first quarter, 

increased at a 3.2-percent SAAR in the second 

quarter. Subsequent to the first quarter rate 

rise of 1.8 percent, recreation increased at a 

0.8-percent SAAR in the second quarter. In 

contrast, the communication index declined, 

falling at a 1.3-percent SAAR in the second 

quarter of 2011, after declining at a 1.4- 

percent rate in the first quarter.

The rate of inflation for all items less food and 

energy has picked up in 2011, with a first half 

SAAR of 2.5 percent. For the 2-year period 

from June 2009 to June 2011, the index for 

all items less food and energy increased at a 

1.3-percent annual rate. Over the same period, 

the heavily weighted shelter index increased 

at a rate of 0.2 percent, and used cars and 

trucks  increased at a 10.5-percent annual rate. 

Other indexes that offset the shelter index’s 

slow growth during the June 2009 to June 

2011 time span included airline fares (10.3 

percent), tobacco (5.4 percent), college tuition

(5.1 percent), and new vehicles (2.7 percent). 

Not all indexes increased during the June 

2009 to June 2011 time span.  Household 

furnishings and operations fell 1.8 percent 

per year, while communication declined 1.0 

percent annually.  The recreation index fell at a 

0.4-percent rate, as the indexes for toys, video 

and audio, and photography all fell over the 

period. 

Price movements described in this text reflect data as released on July 15, 2011. All 

12-month and longer percent changes reflect 

not seasonally adjusted data, except as noted. 

Percent changes covering less than a year are 

based on seasonally adjusted annual rates, 

unless otherwise noted. CPI seasonally adjusted indexes and percent changes are subject 

to annual revision.

Additional information is available from the 

CPI information and Analysis section at cpi_

info@bls.gov or (202) 691-7000.
 CURRENT PRICE TRENDS

Notes

1The 27 EU countries (the “EMU27”) are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, 

Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania; Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. 

2

 The Eurozone, formally the European Monetary Union (EMU), currently consists of 17 EU members: Austria, Belgium, Cyprus, 

Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and 

Spain. Seven other countries will join the Eurozone in the future. Three European microstates (Monaco, San Marino, and the Vatican 

City) also use the euro. Three EU countries (Denmark, Sweden, and the United Kingdom) are not part of the Eurozone. 

3

 For the Eurostat-developed HICP methods, see W. Erwin Diewert, “Harmonized Indexes of Consumer Prices: Their Conceptual 

Foundations” Zeitschrift fur Volkswirtschaft und Statistik 2002, vol. 138 (4) 547–637; available in English at www.econ.ubc.ca/

diewert/harindex.pdf. Also, see “Annex 1 The Harmonized Indices of Consumer Prices (European Union),” in The Consumer 

Price Index: Theory and Practice, Geneva, International Labour Office, 2004. 

4

 The countries’ weights are derived from their “private domestic consumption expenditures,” a component of gross domestic 

product (GDP). 

5

 For a recent example, see http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-16052011-BP/EN/2-16052011-BP-EN.PDF. 

6

 See Walter Lane and Mary Lynn Schmidt, “Comparing U.S. and European inflation: the CPI and the HICP,” Monthly Labor 

Review, May 2006, pp. 20–27, available at http://www.bls.gov/opub/mlr/2006/05/art3full.pdf.

7

 Experimental indexes, which are only available by request, are produced outside the CPI production system after the release of 

each month’s CPI. 

8

 Another probably inconsequential conceptual difference is that the US-HICP uses the “domestic concept” for including expenditures in the weights, which is based on where the expenditures occurred; in contrast, the U.S. CPI uses the “national concept” that 

depends on who made the expenditures. The domestic concept includes expenditures of foreign visitors to a country but excludes 

residents’ out-of-country expenditures. The national concept includes all U.S. residents’ consumption expenditures incurred both at 

home and abroad and excludes expenditures of non-residents. (Expenditures made outside the United States are included in the CPI 

weights, but no prices—except for a few online prices—are collected from sellers abroad.) 

9

 In the CPI-U, the share of weight for motor fuel is currently about 5.1 percent; and, in the US-HICP, about 6.8 percent. It is not 

easy to determine the weight shares for the European HICPs; for example, in the German HICP—which has the largest weight 

among the European HICPs—the weight for fuels and lubricants for personal transport equipment is about 3.6 percent. 

10 Energy Information Administration; see http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WTOTUSA&f=W.

7