Opinion of the European Monetary Institute on a consultation from the Commission of the European Communities under Article 105(4) and 109 f (8) of the Treaty and Article 5(3) of Council Regulation No 2494/95 of 23rd October 1995; on a draft Commission Regulation on minimum standards for prices used in HICPs (No XX/96) (“Draft Regulation”) (CON/96/1)
Date: 1996-02-15
Institutions: European Monetary Institute
Subjects: consumer price, goods and services, harmonisation of prices, price index

OPINION OF THE EUROPEAN MONETARY INSTITUTE 

on  a  consultation  from  the  Commission  of  the  European  Communities  under  Article  105(4)  and

109 f (8) of the Treaty and Article 5(3) of Council Regulation No 2494/95 of 23rd October 1995;

on a draft Commission Regulation on minimum standards for prices used in HICPs (No XX/96)

(“Draft Regulation”).

CON/96/1

1.

The  present  consultation  was  initiated  on  18th  January  1996  by  the  Commission  of  the

European Communities which, for this purpose, transmitted to the EMI document D(96) 30201

containing the Draft Regulation.

2.

The  objective  of  the  Draft  Regulation  is  to  maintain  the  target  sample  from  month  to  month

where  monthly  collection  is  the  requirement,  or  from  period  to  period  where  less  frequent

collection is planned  for  harmonised  indices  of  consumer  prices  (HICPs)  from  January  1997.

Articles  8.1  and  8.2  of  the  above  Council  Regulation  require  monthly  price  collection  for

HICPs,  but  the  Commission  (Eurostat)  may  allow  less  frequent  collection  as  long  as

comparability is not affected. Present practice of substituting missing monthly observations is

regarded to fail the comparability requirement of HICPs.

3.

The EMI welcomes the measures aiming to improve comparability, particularly that

(i) 

(ii)

the regulation applies to all goods and services covered by HICPs.

estimations  are  to  be  used  when  an  observation  is  missing  or  not  required;  carrying

forward previous prices is prohibited, unless they provide the best estimate.

(iii)

estimations may be used only for a limited time.

4.

The  EMI  is  aware  that  there  are  sound  reasons  against  more  constraining  rules  and  that  the

trade-off between cost and accuracy does not in all cases justify a strict obligation for monthly

price  collection  of  all  goods  and  services.  Furthermore,  it  is  acknowledged  that  more  precise

rules can probably only be defined in conjunction with the envisaged regulation on sampling,

since  the  sample  size  and  the  variability  of  prices  influence  the  required  standard  for  prices

used in HICPs.

- 2 -

5.

However,  the  EMI  is  not  fully  satisfied  with  the  required  minimum  standards  for  prices  and

thus regards the Draft Regulation as a starting point for further improvements after 1997. The

present  Draft  Regulation  defines  clearly  neither  the  conditions  to  be  fulfilled  for  granting

exemptions  from  monthly  price  collection,  nor  a  threshold  for  the  application  of  estimated

prices instead of actual prices, nor comparable methods for deriving the estimates.

6.

In  view  of  these  remaining  uncertainties,  quality  control  over  national  practices  becomes

particularly important. The EMI therefore supports the Draft Regulation only with the proviso

that appropriate measures for quality control will be defined in due course in order  to  ensure

compliance with the requirements of the Council Regulation on HICP.

7.

Subject  to  these  reservations  the  EMI  considers  the  Draft  Regulation  to  be  conducive  to

comparable consumer price indices in the European Union.

15th February 1996