1996R1749 — EN — 20.08.1998 — 001.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B COMMISSION REGULATION (EC) No 1749/96
of 9 September 1996
oninitialimplementingmeasuresforCouncilRegulation(EC)No2494/95concerningharmonized
indices of consumer prices
(OJ L 229, 10.9.1996, p. 3)
Amended by:
Official Journal
No page date
►M1Council Regulation (EC) No 1687/98 of 20 July 1998 L 214 12 31.7.1998
►M2Council Regulation (EC) No 1688/98 of 20 July 1998 L 214 23 31.7.1998
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▼B
COMMISSION REGULATION (EC) No 1749/96
of 9 September 1996
on initial implementing measures for Council Regulation (EC) No
2494/95 concerning harmonized indices of consumer prices
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Havingreg ard to the Treaty establishingthe European Community,
Having regard to Council Regulation (EC) No 2494/95 of 23 October
1995 concerningharmonized indices of consumer prices(1), and in
particular Articles 4 and 5 (3) thereof,
Whereas each Member State is required to produce a harmonized index
of consumer prices (HICP) startingwith the index for January 1997;
Whereas Article 3 of Regulation (EC) No 2494/95 requires that the
scope of the HICP shall be the goods and services available forpurchase in the economic territory of the Member State for the purposesof directly satisfyingconsumer needs;
Whereas the coverage of the existing consumer price indices produced
by the Member States, practices followed for the inclusion of newlysignificant goods and services, procedures for adjusting prices forquality changes of the items priced, methods of combining prices toform price indices for elementary aggregates, or sampling methods andpractices for obtainingprices differ between Member States to theextent that the resultingconsumer price indices produced by theMember States fail to meet the comparability requirement necessary forthe production of the HICP;
Whereas the practice of usingprevious prices as substitutes for the
current monthly prices differs from the use of prices collected to theextent that the resultingconsumer price indices produced by theMember States fail to meet the comparability requirement necessary forthe production of the HICP;
Whereas it is necessary to include newly significant goods and services
in both HICPs the weights of which are updated annually and those theweights of which are updated less frequently;
Whereas implementingmeasures are necessary for ensuringcompar-
ability of HICPs in accordance with Article 5 (3) of Regulation (EC) No2494/95;
Wheres in accordance with Article 15 of Regulation (EC) No 2494/95,
the Commission (Eurostat) is required to submit a report to the Councilon the reliability of the HICP’s and their compliance with the compar-ability requirements;
Whereas the measures provided for in this Regulation are in accordance
with the opinion of the Statistical Programme Committee (SPC), estab-lished by Council Decision 89/382/EEC, Euratom(
2);
Whereas the European Monetary Institute has been consulted in confor-
mance with Article 5 (3) of Regulation (EC) No 2494/95 and has givena positive opinion,
(1) OJ No L 257, 27. 10. 1995, p. 1.
(2) OJ No L 181, 28. 6. 1989, p. 47.
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HAS ADOPTED THIS REGULATION:
I. GENERAL PROVISIONS
Article 1
Aim
The aim of this Regulation is to establish for the purpose of the
production of a comparable harmonized index of consumer prices(HICP) produced by each Member State:
— the►
M1 ◄coverage of goods and services as well
as comparable practices for updatingthe coverag e to include newlysignificant consumer goods and services,
— minimum standards for the procedures of quality adjustment,— minimum standards for the prices used,— the formula for compiling price indices for the elementary aggre-
gates.
The aim is also to ensure that the samplingof prices is such that the
HICPs are sufficiently reliable for the purpose of international compari-sons and to provide information from which to set minimum standardsfor sampling.
Article 2
Definitions
For the purpose of this Regulation:
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(a)(1) The ‘coverage' of the HICP is defined as those goods and
services which are included in household final monetaryconsumption expenditure, as referred to in (a)(2). It is classifiedaccording to the four-digit categories and sub-categories given inAnnex Ia, which derive from the COICOP international classi-fication and shall be known as COICOP/HICP (classification ofindividual consumption by purpose adapted to the needs ofHICPs).
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(a)(2) ‘Household final monetary consumption expenditure' is defined
as that part of final consumption expenditure which is incurred:
— by households irrespective of nationality or residence status,
and
— in monetary transactions, and— on the economic territory of the Member State, and— on goods and services that are used for the direct satisfaction
of individual needs or wants, and
— in one or both of the time periods beingcompared.
Household final monetary consumption expenditure is specified in
Annex 1b and follows the definitions laid down in the EuropeanSystem of Accounts (ESA) 1995 contained in Regulation (EC) No2223/96 (
1).
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(a)(3) Prices used in the HICP are the purchase prices paid by house-
holds to purchase individual goods and services in monetarytransactions. Where goods and services have been available toconsumers free of charge, and subsequently an actual price ischarged, then the change from a zero price to the actual price,and vice versa, should be taken into account in the HICP.
(1) OJ L 310, 13.11.1996, p. 1.
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(a)(4) The ‘weights' of the HICP are the aggregate expenditure by
households on any set of goods and services covered by theHICP expressed as a proportion of the total expenditure on allgoods and services covered.
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(b) ‘Newly significant goods and services'are defined as those goods
and services the price changes of which are not explicitlyincluded in a Member State’s HICP and the estimated consum-ers’ expenditure on which has become at least one part perthousand of the expenditure covered by that HICP.
(c) ‘Quality change'occurs whenever the Member State judges that a
change in specification has resulted in a significant difference inutility to the consumer between a new variety or model of a goodor service and a good or service previously selected for pricing inthe HICP for which it is substituted. A quality change does notarise when there is a comprehensive revision of the HICPsample.
(d) ‘Quality adjustment'is the procedure of makingan allowance for
a quality chang e by increasingor decreasingthe observed currentor reference prices by a factor or an amount equivalent to thevalue of that quality change.
(e) ‘Target sample' is defined as the set of prices of goods and
services which the Member State plans to obtain for the produc-tion of the HICP from January 1997 or plans at some subsequentdate in order to meet the Member States’ own or any Europeanstandard for reliability or comparability.
(f) ‘Observed price' is a price actually confirmed by the Member
States.
(g) ‘Estimated price'is a price which is substituted for an observed
price and is based on an appropriate estimation procedure. Previ-ously observed prices shall not be regarded as estimated pricesunless they can be shown to be appropriate estimates.
(h) ‘Replacement price' is an observed price for a good or service
which is taken as a direct substitute for a good or service theprice of which was in the target sample.
(i) ‘Elementary aggregate index'is a price index for an elementary
aggregate comprising only price data.
(j) ‘Elementary aggregate'refers to the expenditure or consumption
covered by the most detailed level of stratification of the HICPand within which reliable expenditure information is not avail-able for weighting purposes.
(k) ‘Sampling' relates to any procedure in the construction of the
HICP where a subset of the population of the prices faced byconsumers is used to estimate the price change for some categoryof the goods and services covered by the HICP.
(l) ‘Reliability' shall be assessed accordingto ‘precision' which
refers to the scale of samplingerrors and ‘representativity'whichrefers to the lack of bias.
II. MEASURES FOR ENSURING COMPARABILITY, RELIABILITY
AND RELEVANCE OF THE HICP
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Article 3
Coverage
1. HICPs compiled from price changes and weights for each category
of household final monetary consumption expenditure given in AnnexIa accountingfor more than one part in a thousand of the total expendi-ture covered by all those categories included as specified in paragraph2, shall be deemed comparable.
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2. The coverage of the HICP shall be extended, as follows:
(a) startingwith the production of the HICP for January 1997, Member
States shall process the data collected coveringthose categ oriesmarked as ‘initial coverage' as specified in Annex Ia;
(b) on, but not before, the production of the HICP for December 1999,
Member States shall process the data collected coveringalso thosecategories marked as ‘December 1999' as specified in Annex Ia.
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3. HICPs compiled usingsub-index weig hts which reflect finalmonetary consumption expenditure of a sub-set of households, ratherthan of all households, shall be deemed comparable, where this differ-ence in practice accounts for less than one part in a thousand of the totalexpenditure covered by the HICP. Any amendments of the weightsnecessary to secure comparability as defined in this paragraph shall beimplemented by December 1999 at the latest.
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Article 4
Newly significant goods and services
Member States shall:
(a) systematically seek to identify newly significant goods and services
and
(b) check the significance of goods and services reported to be newly
significant in other Member States.
The HICP shall be compiled to include the price changes of a newly
significant good or service, where the good or service has been esti-mated as fallingwithin the definition in Article 2 (b). This shall beaccomplished within 12 months of their identification either byadjusting the weights of or within the relevant category of COICOP/HICP classification given in ►
M1Annex Ia ◄to this Regulation or
by assigning part of the weight specifically to the newly significantgood or service.
Article 5
Minimum standards for procedures of quality adjustment
1. HICPs for which appropriate quality adjustments are made shall
be deemed to be comparable. Where quality changes occur, MemberStates shall construct price indices by makingappropriate qualityadjustments based on explicit estimates of the value of the qualitychange. In the absence of national estimates, Member States shall useestimates based on information provided by the Commission (Eurostat)where these are available and relevant.
2. Where no estimates are available, price changes shall be estimated
as the difference between the price of the selected substitute and that ofthe item it has replaced. In no case should a quality change be estimatedas the whole of the difference in price between the two items, unlessthis can be justified as an appropriate estimate. Where replacementshave to be made after goods or services have been offered at reducedprices, those replacements should be selected accordingto their simi-larity of utility to the consumer and not accordingto similarity of price.
Article 6
Minimum standards for prices
1. Member States shall produce HICPs usingthe observed prices of
the target sample.
(a) Where the target sample requires monthly observation, but observa-
tion fails due to non-availability of an item or for any other reason,estimated prices may be used for the first or second month butreplacement prices shall be used from the third month.
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(b) Where, exceptionally, the target sample requires observations less
frequently than monthly, estimated prices shall be used for thosemonths where observed prices are not required. Estimated pricesmay also be used on the first occasion on which price observationfails. Where observation fails for a second consecutive occasion,replacement prices shall be used.
2. Where, in the circumstances referred to in this Article, replace-
ment prices are not available, estimated prices may continue to be used,provided that the extent of their use is limited to a level appropriate forachievingcomparability.
Article 7
Price indices for elementary aggregates
HICPs shall be compiled usingeither of the two formulae g iven in
paragraph 1 of Annex II to this Regulation or an alternative comparableformula which does not result in an index which differs systematicallyfrom an index compiled by either of the given formulae by more thanone tenth of one percentage point on average over one year against theprevious year.
Article 8
Minimum standards for sampling
HICPs constructed from target samples which, for each category of
COICOP/HICP and taking into account the weight of the category, havesufficient elementary aggregates to represent the diversity of itemswithin the category and sufficient prices within each elementary aggre-gate to take account of the variation of price movements in the popula-tion shall be deemed reliable and comparable.
Article 9
Quality control
Member States shall:
(a) provide the Commission (Eurostat) at its request with information
on the expenditure of any exclusions from coverage, expressed as aproportion of the total expenditure covered by the HICP, sufficientto evaluate compliance with this Regulation;
(b) report to the Commission (Eurostat) newly significant goods and
services when they are identified and, if required, the grounds forthe non-inclusion of any newly significant good or service sufficientto evaluate compliance with this Regulation;
(b) monitor the incidence of quality changes and the adjustments made
sufficient to demonstrate compliance with this Regulation and shallprovide the Commission (Eurostat) at its request with such informa-tion;
(d) establish and maintain a clear statement of the target sample and
shall maintain checks of price observations and price estimatessufficient to ensure compliance with this Regulation. They shallprovide the Commission (Eurostat) at its request with such informa-tion to evaluate and ensure compliance;
(e) where a formula different from the formulae given in paragraph 1
of Annex II to this Regulation is used, provide the Commission(Eurostat) at its request with information on the effects of usingthatalternative formula for selected periods and selected elementaryaggregates sufficient to evaluate compliance with this Regulation;
(f) provide the Commission (Eurostat) at its request with details of the
target samples sufficient to evaluate compliance with this Regula-tion and summary statistics of the representativity and precision ofsamples sufficient for the Commission (Eurostat) to make proposalsfor minimum standards for samplingfor inclusion in the Review of
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HICPs required under Article 15 of Regulation (EC) No 2494/95due in October 1997.
III. FINAL PROVISIONS
Article 10
This Regulation shall enter into force on the 20th day following its
publication in the Official Journal of the European Communities .
This Regulation shall be binding in its entirety and directly applicable in
all Member States.
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Code COICOP/HICP headingInitial
coverage
January 1997Addition
December 1999Excluded▼M1
ANNEXIa
The coverage of the HICP shall include the following categories of COICOP/HICP:
01. FOOD AND NON-ALCOHOLIC BEVER-
AGES
01.1. Food
01.1.1. Bread and cereals full
01.1.2. Meat full
01.1.3. Fish full
01.1.4. Milk, cheese and eggs full
01.1.5. Oils and fats full
01.1.6. Fruit full
01.1.7. Vegetables including potatoes and othertubers full
01.1.8. Sugar, jam, honey, syrups, chocolate andconfectionery full
01.1.9. Food products n.e.c. full
01.2. Non-alcoholic beverages
01.2.1. Coffee, tea and cocoa full
01.2.2. Mineral waters, soft drinks and juices full
02. ALCOHOLIC BEVERAGES ANDTOBACCO
02.1. Alcoholic beverages
02.1.1. Spirits full
02.1.2. Wine full
02.1.3. Beer full
02.2. Tobacco
02.2.1. Tobacco full
02.3. Narcotics
02.3.1. Narcotics excluded
03. CLOTHING AND FOOTWEAR
03.1. Clothing
03.1.1. Clothingmaterials full
03.1.2. Garments full
03.1.3. Other articles of clothingand clothingacces-
soriesfull
03.1.4. Dry-cleaning, repair and hire of clothing full
03.2. Footwear
03.2.1. Shoes and other footwear full
03.2.2. Repair and hire of footwear full
04. HOUSING, WATER, ELECTRICITY, GASAND OTHER FUELS
04.1. Actual rentals for housing
04.1.1. Actual rentals paid by tenants part (1) full (2)
04.1.2. Other actual rentals part (1) full (2)
04.2. Imputed rentals for housing
04.2.1. Imputed rentals of owner-occupiers excluded (3)
04.2.2. Other imputed rentals excluded (3)
04.3. Regular maintenance and repair of the
dwelling
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Code COICOP/HICP headingInitial
coverage
January 1997Addition
December 1999Excluded
04.3.1. Products for the regular maintenance and
repair of the dwellingfull (4)
04.3.2. Services for the regular maintenance andrepair of the dwelling full (4)
04.4. Other services relatingto the dwelling
04.4.1. Refuse collection part (5) full (6)
04.4.2. Sewerage services part (5) full (6)
04.4.3. Water supply part (5) full (6)
04.4.4. Other services relatingto the dwellingn.e.c. full
04.5. Electricity, gas and other fuels
04.5.1. Electricity full
04.5.2. Gas full
04.5.3. Liquid fuels full
04.5.4. Solid fuels full
04.5.5. Hot water, steam and ice full
05. FURNISHINGS, HOUSEHOLD EQUIP-MENT AND ROUTINE MAINTENANCEOF THE HOUSE
05.1. Furniture, furnishings and decorations,carpets and other floor coverings and repairs
05.1.1. Furniture and furnishings full
05.1.2. Carpets and other floor coverings full
05.1.3. Repair of furniture, furnishings and floorcoverings full
05.2. Household textiles
05.2.1. Household textiles full
05.3. Heatingand cookingappliances, refrig era-tors, washingmachines and similar majorhousehold appliances, includingfitting s andrepairs
05.3.1. Major household appliances whether electricor not full
05.3.2. Small electric household appliances full
05.3.3. Repair of household appliances full
05.4. Glassware, tableware and household utensils
05.4.1. Glassware, tableware and household utensils full
05.5. Tools and equipment for house and garden
05.5.1. Major tools and equipment full
05.5.2. Small tools and miscellaneous accessories full
05.6. Goods and services for routine householdmaintenance
05.6.1. Non-durable household goods full
05.6.2. Domestic services and home care services full
06. HEALTH
06.1. Medical products, appliances and equipment
06.1.1. Medical products, appliances and equipment part (7) full (8)
06.2. Out-patient services
06.2.1. Medical services full (8)
06.2.2. Dental services full (8)
06.2.3. Paramedical services full (8)
06.3. Hospital services
06.3.1. Hospital services (9)
07. TRANSPORT
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Code COICOP/HICP headingInitial
coverage
January 1997Addition
December 1999Excluded
07.1. Purchase of vehicles
07.1.1A. New motor cars full
07.1.1B. Second-hand motor cars full
07.1.2. Motor cycles full
07.1.3. Bicycles full
07.2. Operation of personal transport equipment
07.2.1. Spare parts and accessories full
07.2.2. Fuels and lubricants full
07.2.3. Maintenance and repairs full
07.2.4. Other services in respect of personal trans-
port equipmentfull (10)
07.3. Transport services
07.3.1. Passenger transport by railway full
07.3.2. Passenger transport by road full
07.3.3. Passenger transport by air full
0.7.3.4. Passenger transport by sea and inlandwaterway full
07.3.5. Other purchased transport services full
07.3.6. Combined tickets full (11)
08. COMMUNICATIONS
08.1. Communications
08.1.1. Postal services full
08.1.2. Telephone and telefax equipment full
08.1.3. Telephone, telegraph and telefax services full
09. RECREATION AND CULTURE
09.1. Audio-visual, photographic and dataprocessingequipment and accessories,includingrepairs
09.1.1. Equipment for the reception, recordingandreproduction of sound and pictures full
09.1.2. Photographic and cinematographic equipmentand optical instruments full
09.1.3. Data processingequipment full
09.1.4. Recordingmedia for pictures and sound full
09.1.5. Repair of audio-visual, photographic and dataprocessingand accessories full
09.2. Other major durables for recreation andculture
09.2.1. Other major durables for recreation andculture full
09.2.2. Repair of other major durables for recreationand culture full
09.3. Other recreational items and equipment;flowers, gardens and pets
09.3.1. Games, toys and hobbies, equipment forsport, campingand open-air recreation full
09.3.2. Gardening full
09.3.3. Pets full
09.4. Recreational and cultural services
09.4.1. Sportingand recreational services full (12)
09.4.2. Cultural services full (13)
09.4.3. Games of chance excluded
09.5. Newspapers, books and stationery
09.5.1. Books part (14) full (15)
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Code COICOP/HICP headingInitial
coverage
January 1997Addition
December 1999Excluded
09.5.2. Newspapers and periodicals full
09.5.3. Miscellaneous printed matter full
09.5.4. Stationery and drawingmaterials part (14) full (15)
09.6. Package holidays
09.6.1. Package holidays full
10. EDUCATION
10.1. Educational services
10.1.1. Pre-primary and primary education full (15)
10.1.2. Secondary education full (15)
10.1.3. Tertiary education full (15)
10.1.4. Education not definable by level part (16) full (15)
11. HOTELS, CAFES AND RESTAURANTS
11.1. Catering
11.1.1. Restaurants and cafes full
11.1.2. Canteens part (14) full (15)
11.2. Accommodation services
11.2.1. Accommodation services part (14) full (15)
12. MISCELLANEOUS GOODS AND
SERVICES
12.1. Personal care
12.1.1. Hairdressingsalons and personal g roomingestablishments full
12.1.2. Appliances, articles and products for personalcare full
12.1.3. Personal care services n.e.c. excluded
12.2. Personal effects n.e.c.
12.2.1. Jewellery, clocks and watches full
12.2.2. Other personal effects full
12.3. Social protection
12.3.1. Social protection services part (17)
12.4. Insurance
12.4.1. Life insurance excluded
12.4.2. Insurance connected with the dwelling part (18) full (19)
12.4.3. Insurance connected with health full (20), (21)
12.4.4. Insurance connected with transport part (22)full (23), (21)
12.4.5. Other insurance full (24), (21)
12.5. Financial services n.e.c.
12.5.1. Financial services n.e.c. part (25) full (26)
12.5.2. FISIM excluded
12.6. Other services n.e.c.
12.6.1. Other services n.e.c. full (27)
(1) Relates to the practice followed in the national consumer price indices.
(2) Refers to all rentals actually paid by tenants, i.e. the rentals the tenant pays to the landlord regardless of any
social benefits the tenant receives from public authorities (includingpayments which at the tenant’s discretion g odirectly to the landlord); see also Annex Ib No 12b.
(
3) This does not prejudge the coverage of owner-occupied housing in general.
(4) Refers to expenditure which tenants or owner-occupiers incur on materials and services for minor maintenance
and repairs; following a decision on the treatment of owner-occupied housing, the coverage of this categorymight need to be extended to include expenditure for major decoration, maintenance and repair of the dwellingand for extensions and conversions of the dwellingnot typically paid by tenants; see also Annex Ib Nos 4 and15.
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(5) Refers to expenditure accordingto consumption.
(6) Refers to separately identifiable charg es for specific services relatingto the dwellingwhether or not consumers
pay accordingto consumption that is, excludingpayments for services financed out of g eneral taxation; see alsoAnnex Ib Nos 9 and 29.
(
7) Refers to health goods outside the social security system.
(8) Full coverage refers to that part of expenditure on health goods and services (other than hospital out-patient
services) which is paid by the consumer and not reimbursed by government, social security or NPISHs; seeAnnex Ib No 12a and the methodological details of inclusion as specified in accordance with the procedure laiddown in Article 14 of Council Regulation (EC) No 2494/95.
(
9) The methodological details and the timetable of inclusion shall be specified in accordance with the procedure
laid down in Article 14 of Council Regulation (EC) No 2494/95.
(10) Includes drivinglicences, road worthiness tests, motor association fees, tolls for bridg es, tunnels, shuttle-ferries,
and motorways; excludes licences to own or use vehicles; see also Annex Ib Nos 9, 18 and 19b.
(11) Refers to tickets coveringtwo or more modes of transport and the expenditure cannot be apportioned between
them.
(12) Includes fees or subscriptions to sports clubs and fitness centres; it also includes payments for huntingand
fishing licences if the government uses the issue of licences to organise some proper regulatory function; see alsoAnnex Ib Nos 9 and 19b.
(
13) Includes entrance fees to museums, fees for libraries, and licence fees and subscriptions to television and radio;
see also Annex Ib Nos 9 and 10.
(14) Includes educational goods and services only if they are fully paid by consumers.
(15) Full coverage refers to that part of expenditure on educational goods and services which is paid by the consumer
and not reimbursed by government, social security or NPISHs; see Annex Ib No 12a and the methodologicaldetails of inclusion as specified in accordance with the procedure laid down in Article 14 of Council Regulation(EC) No 2494/95.
(
16) Refers to computer courses, language courses, typing courses, and other such courses which are fully paid by the
consumer.
(17) Refers to crèches, nurseries, play schools and kindergartens which are not an obligatory part of the educational
system; covered is only that expenditure which is paid by the consumer and not reimbursed by government,social security or NPISHs; see also Annex Ib No 12a; other items within code 12.3.1 such as retirement homes,schools for the disabled, home cleaning services, and meal programmes are subject to the same arrangement asdescribed in footnote 18.
(
18) Refers to service charges for contents insurance.
(19) Refers to all service charges paid by owner-occupiers and tenants for the kinds of insurance typically taken out
by tenants against fire, theft, water damage, etc.; see also Annex Ib Nos 7, 8 and 24. Following a decision on thetreatment of owner-occupied housing, the coverage of this category might need to be extended to include servicecharges paid by owner-occupiers for the kinds of insurance for the dwelling typically taken out by landlords.
(
20) Refers to service charges for private sickness and accident insurance; see also Annex Ib Nos 7, 8 and 24 and the
methodological details of inclusion of category ‘06. Health'as specified in accordance with the procedure laiddown in Article 14 of Council Regulation (EC) No 2494/95.
(
21) The methodological details and the timetable of inclusion shall be specified in accordance with the procedure
laid down in Article 14 of Council Regulation (EC) No 2494/95. The implementation may be scheduled for anearlier date.
(
22) Refers to service charges for insurance in respect of personal transport equipment.
(23) Refers to service charges in respect of personal transport equipment, travel insurance and luggage insurance; see
also Annex Ib Nos 7, 8 and 24.
(24) Refers to service charges for insurance such as civil liability for injury or damage to third parties or their
property not arisingfrom the operation of personal transport equipment; see also Annex Ib Nos 7, 8 and 24.
(25) Refers to bankingservice charg es which are not expressed as a proportion of the transaction value.
(26) Refers to financial services includingbankingservices; not covered are service charg es for private or public
pension funds, which are a kind of life insurance but restricted to specific groups of persons, as well as interestpayments; see also Annex Ib Nos 21 and 23.
(
27) Includes fees for the issue of passports, birth, marriage or death certificates, and dues for membership to
professional associations if they can be considered as payments for services rendered; see Annex Ib Nos 9 and19.
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ANNEXIb
A. DEFINITION OF HOUSEHOLD FINAL MONETARY CONSUMPTION
EXPENDITURE
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1. The household sector consists of households which include all individ-
uals or groups of individuals (as defined in ESA 2.76.a and 2.76.b)irrespective of, in particular, the type of area in which they live, theirposition in the income distribution and their nationality or residencestatus. It includes individuals livingin institutional households (asdefined in ESA 2.76.b). It does not include businesses.
2. The economic territory is as defined in ESA 2.05 except that the
extraterritorial enclaves situated within the boundaries of the country areincluded and the territorial enclaves situated in the rest of the world areexcluded.
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3. A monetary transaction is an economic flow that is an interaction
between institutional units by mutual agreement, where the unitsinvolved make or receive payments, or incur liabilities or receive assetsdenominated in units of currency. By convention the collection ofhousehold refuse shall be considered as interaction by mutual agree-ment. Transactions that do not involve the exchange of cash, or assets orliabilities denominated in units of currency, are non-monetary transac-tions. Intra-unit transactions are normally non-monetary transactions.Non-monetary transactions involvingmore than one institutional unitoccur amongtransactions in products (barter of products), distributivetransactions (remuneration in kind, transfers in kind, etc.) and othertransactions (barter of non-produced non-financial assets).
Household final monetary consumption expenditure covers the
following borderline cases:
4. It covers items not treated as intermediate consumption, like materials
for small repairs to and interior decoration of dwellings of a kindtypically carried out by tenants as well as owners, and materials forrepairs and maintenance to consumer durables, includingvehicles.
5. It covers items not treated as capital formation, in particular consumer
durables, that continue to perform their function in several accountingperiods; this includes the transfer of ownership of some durables froman enterprise to a household.
6. It covers financial services directly charged.7. It covers non-life insurance services by the amount of the implicit
service charge.
8. It covers all expenditure financed out of non-life insurance claims,
includingpayments made directly by the insurance companies to thegarages, hospitals, doctors, etc. This implies that the full price paid byhouseholds or by insurance companies to the garages, hospitals, doctors,etc. is covered by the HICP.
Non-life insurance claims are the amounts which insurance enterprises
are obliged to pay in settlement of injuries or damage suffered bypersons or goods. They are current transfers from the insurance compa-nies to the receivinghouseholds and, therefore, enter into the house-holds’ disposable income. Any expenditure made as a result, forexample payments to garages, hospitals, or doctors, is treated as beingincurred by the households and not by the insurance companies. It isirrelevant whether the households actually make the expenditure beforethe claims are paid out, which then look like social security reimburse-ments, or whether the payments are made directly by the insurancecompanies to the garages, hospitals, etc. In the latter case, the companiesare treated merely as agents acting on behalf of the households who arestill treated as incurringthe expenses.
9. It covers payments by households for licences, permits, etc. which are
regarded as purchases of services. If the government uses the issue oflicences to organise some proper regulatory function, such as checkingthe competence or qualification of the person concerned, the paymentsmade should be treated as a purchase of services from government andthe prices taken in the HICP, but if the licences are beingg rantedautomatically on payment of the amounts due, payments should betreated as direct taxes and not prices. Drivingor pilot’s licences, televi-
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sion or radio licences, firearm licences, museum or library admissions,
garbage disposal fees, etc. are treated in most cases as purchases ofservices rendered by government, whereas licences on the use ofvehicles, boats or aircraft are treated in most cases as taxes.
10. It covers the purchase of output at not economically significant prices,
e.g. entrance fees for a museum.
Household final monetary consumption expenditure does not cover
the following borderline cases:
11. It does not cover income in kind because it is not a monetary transac-
tion (although according to ESA 3.76.b it is included in final consump-tion expenditure).
12. (a) It does not cover social transfers in kind received by households,
includingthose parts of expenditure initially made by householdsfor which they are subsequently reimbursed by social security,government units or NPISHs, e.g. for medical expenses or educa-tion. When a household purchases a good or service for which it issubsequently reimbursed in part or in whole, the household istreated merely as agent acting on behalf of a social security fund,government unit or NPISH. The amounts reimbursed to householdsare treated as social transfers in kind made by social security,government units or NPISHs. They are not recorded as cash trans-fers to households and do not form part of households’ disposableincomes. This accountingtreatment leads to the same result as whena social security fund purchases the goods and services from marketproducers and then re-sells them to households at low non-marketprices. This implies that the price taken for the HICP is the amountpaid by the household less the reimbursement.
(b) All other rebates by public authorities, especially housingpayments
to tenants in order to reduce their rents (includingpayments whichat the tenant’s discretion go directly to the landlord), are consideredas social benefits in cash and, therefore, enter into households’disposable income. This implies that the full price of the good orservice before the rebate is covered by the HICP.
13. It also does not cover services of owner-occupied dwellings, because
these are no monetary transactions (although according to ESA 3.76.a itis included in final consumption expenditure).
14. It does not cover the purchase of dwellings, and items treated as
acquisitions of a non-produced asset, in particular the purchase of land.
15. It also does not cover expenditure that an owner-occupier incurs on the
decoration, maintenance and repair of the dwellingnot typically carriedout by tenants.
16. It does not cover the expenditure on valuables.17. It does not cover expenditure by households owningunincorporated
enterprises when incurred for business purposes.
18. It does not cover current taxes on income and wealth, which are all
compulsory, unrequited payments, in cash or in kind, levied periodicallyby general government and by the rest of the world on the income andwealth of institutional units, and some periodic taxes which are assessedneither on the income nor the wealth. Other current taxes include allthose payments by households for licences which are to be regarded astaxes, such as licences to own or use vehicles, boats or aircraft, etc.
19. (a) It does not cover subscriptions, contributions and dues paid by
households to NPISHs, like trade unions, professional societies,consumers’ associations, churches and social, cultural, recreationaland sports clubs.
(b) However, if a club, union, society or association can be considered
as a market producer sellingits services at an economically sig nifi-cant price, which usually is the case even though the legal statusmay be a non-profit organisation, then the subscriptions, contribu-tions and dues paid by households are considered as payments forthe services rendered — not as a transfer — and, thus, covered bythe HICP.
20. It does not cover voluntary transfers in cash or in kind by households to
charities, relief and aid organisations.
21. It does not cover payments of property income, includinginterest.
Property income is the income receivable by the owner of a financialasset or a tangible non-produced asset in return for providing funds to,or puttingthe tang ible non-produced asset at the disposal of, anotherinstitutional unit. Under the terms of the financial instrument agreed
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between them, interest is the amount that the debtor becomes liable to
pay to the creditor over a given period of time without reducing theamount of principal outstanding.
22. It does not cover compulsory or voluntary social contributions, such as
employers’ actual social contributions to social security funds, insuranceenterprises or autonomous as well as non-autonomous pension fundsadministeringsocial insurance schemes to secure social benefits for theiremployees, or employees’ social contributions payable to social security,private funded and unfunded schemes.
23. It does not cover life insurance and pension fundingservices (althoug h
accordingto ESA 3.76.f and gsuch services are included in finalconsumption expenditure by the amount of the implicit service charge).
24. It does not cover net non-life insurance premiums. These are premiums
payable under policies taken out by institutional units. The policiestaken out by individual households are those taken out on their owninitiative and for their own benefit, independently of their employers orgovernment and outside any social insurance scheme. Net non-life insur-ance premiums comprise both the actual premiums payable by policyholders to obtain insurance cover duringthe accountingperiod(premiums earned) and the premium supplements payable out of theproperty income attributed to insurance policy holders, after deductingthe service charges of insurance enterprises arranging the insurance.(NB:this service charge is covered by the household final monetary
consumption expenditure). Net non-life insurance premiums are theamounts available to provide cover against various events or accidentsresulting in damage to goods or property, or harm to persons as a resultof natural or human causes, for example fires, floods, crashes, collisions,sinkings, theft, violence, accidents, sickness, or against financial lossesresultingfrom events such as sickness, unemployment, accidents, etc.
25. It does not cover current transfers between households, which consist of
all current transfers in cash or in kind made, or received, by residenthouseholds to, or from, other resident or non-resident households.
26. It does not cover fines and penalties. They are imposed on institutional
units by courts of law or quasi-judicial bodies and treated as compulsorycurrent transfers. Also not covered are fines and penalties imposed bytax authorities for the evasion or late payment of taxes, which cannotusually be distinguished from the taxes themselves.
27. It does not cover lotteries and gambling; neither the payment of the
service charge to the unit organising the lottery or gambling, nor theresidual current transfer that is paid out to the winners (althoughaccordingto ESA 4.135 the service charg e is included in final consump-tion expenditure).
B. DEFINITION OF PRICE
28. At the time of purchase, the purchaser’s price is the price for the
products the purchaser actually pays; includingany taxes less subsidieson the products; after deductions for discounts for bulk or off-peak-purchases from standard prices or charges; excluding interest or servicescharges added under credit arrangements; excluding any extra chargesincurred as a result of failingto pay within the period stated at the timethe purchases were made.
29. Goods and services for individual consumption (‘individual goods and
services')are acquired by a household and used to satisfy the needs andwants of members of that household. Individual goods and services havethe followingcharacteristics:
(a) it must be possible to observe and record the acquisition of the good
or services by an individual household or member thereof and alsothe time at which it took place;
(b) the household must have agreed to the provision of the good or
service and take whatever action is necessary to make it possible,for example by attendinga school or clinic;
(c) the good or service must be such that its acquisition by one house-
hold or person, or possibly by a small, restricted group of persons,precludes its acquisition by other households or persons.
All household final consumption expenditure is individual. By conven-
tion, all goods and services provided by NPISHs are treated as indi-vidual.
By convention, all government final consumption expenditure on educa-
tion, health, social security and welfare, sport and recreation, and cultureshould be treated as expenditure on individual consumption servicesexcept for expenditure on general administration, regulation, research,
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etc. In addition, expenditure on the provision of housing, the collection
of household refuse, and the operation of transport system should alsobe treated as individual. The collective consumption expenditure is theremainder of the government final consumption expenditure. It consistsin particular of management and regulation of society, the provision ofsecurity and defence, the maintenance of law and order, legislation andregulation, the maintenance of public health, the protection of the envir-onment, research and development, and the infrastructure and economicdevelopment.
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ANNEXII
Formulae to be used in compiling elementary aggregates
1. When compiling price indices for elementary aggregates either the ratio of arithmetic mean
prices1
nΣpt
1
nΣpbor the ratio of geometric mean prices[Πpt]1/n
[Πpb]1/n, where ptis the current
price, pbthe reference price and n the number of such prices in the elementary aggregate, shall be
used. An alternative formula may be used provided that it fulfils the comparability requirement laiddown in Article 7.
2. The arithmetic mean of price relatives1
nΣPt
Pbshould not normally be used, as it will in
many circumstances result in failure to meet the comparability requirement. It may be used
exceptionally where it can be shown not to fail the comparability requirement.
3. The price index for an elementary aggregate may be calculated as a chain index using one of the
above two preferred formulae. For example usingthe ratio of arithmetic means:
Itb=Σi/SS11sbPi1
Σi/SS11sbPib·Σi/SS11slPi2
Σi/SS11slPil…Σi/SS11st—lPi1
Σi/SS11st—lPit—l,
where Pit denotes the ithprice quotation for a given elementary aggregate in period t and stdenotes
the sample of prices obtained for the elementary aggregate in period t. This sample may in practicebe updated monthly or, more usually, when prices cannot be obtained, over longer periods. Ifbetween base period b and period t there is no replenishingat all I t
bbecomes
Itb=Σi/SS11sbPit
Σi/SS11sbPib, the simple ratio of arithmetic means (or similarly with the geometric formula
described above). The arithmetic mean of price relatives must not be used where chainingis more
frequent than annual.