Opinion of the European Monetary Institute on a consultation from the Commission of the European Communities under Articles 105 (4) and 109 f (8) of the Treaty and Article 5 (3) of Council Regulation No 2494/95 of 23 October 1995 on a draft Commission Regulation (EC) concerning minimum standards for the quality of HICP weights (No XX/97) (“Draft Regulation”) (CON/97/22)
Date: 1997-10-16
Institutions: European Monetary Institute
Subjects: consumer price, consumption expenditure, harmonisation of prices, monetary union, price index

GS/LD/97/688

OPINION OF THE EUROPEAN MONETARY INSTITUTE

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

and 109 f (8) of the Treaty and Article 5 (3) of Council Regulation No 2494/95 of

23 October 1995 on a draft Commission Regulation (EC) concerning minimum standards for

the quality of HICP weights (No XX/97) (“Draft Regulation”)

CON/97/22

1.  The present consultation was initiated on 23 September  1997  by  the  Commission  of  the  European

Communities  which,  for  this  purpose,  transmitted  to  the  EMI  document  [Lm SG(97)D/165599]

containing the Draft Regulation.

2.  In its Opinion on Commission Regulation (EC) No 1749/96 of 9 September 1996 the EMI noted that

it considers the consultation obligation to be “an essential tool which enables the EMI as a main

user  of  future  HICPs  and  as  predecessor  of  the  ECB  to  put  forward  its  position  on  the

envisaged  harmonisation  measures.  Given  the  procedure  provided  for  in  Article  14  of  the

Council Regulation on HICP, which enables the Commission to adopt the measures envisaged

only  if  they  are  in  accordance  with  the  opinion  of  the  Statistical  Programme  Committee

(SPC),  it  is  highly  desirable,  in  the  opinion  of  the  EMI,  that  the  latter  is  formally  consulted

well  in  advance  of  the  corresponding  meeting  of  the  SPC.  A  consultation  at  a  later  stage

much  reduces the effectiveness of the EMI’s opinion”.  With  reference  to  this,  the  EMI  notes

that the present Draft Regulation was submitted to the SPC for its meeting in May 1997 and that

the above concerns were not taken into account.

3.  Against  the  background  of  the  differing  practices  in  the  Member  States  for  updating  the  index

weights of consumer price statistics, the EMI welcomes the Draft Regulation. Given the lead time

required for the implementation of new index weights, the Draft Regulation requires the application

of weights relating to a reference period not exceeding seven years prior to the current year. This

proposal will, in practice, mean that all weights will have to be updated once every one to five years.

This will enhance both the comparability and the reliability of the HICP.

 
 
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4.  The EMI agrees that, within the required upper threshold, a higher frequency for updating individual

sub-index weights is required if these individual weights change noticeably. This helps to ensure that

weights reflect an accurate and up-to-date pattern of expenditure.

5.  The detailed annual review of the expenditure pattern of consumers and the possible annual update

of  sub-index  weights  are  new  requirements  for  most  Member  States.  While  the  proposal  is

theoretically  and  technically  sound,  the  EMI  notes  two  implications  of  the  proposal.  First,  reliable

sources for the regular weight review are a precondition for updating HICP weights but these might

not  be  readily  available  in  all  Member  States  at  intervals  of  a  year.  The  accuracy  and  the

comparability of these sources will determine the effectiveness of the Draft Regulation.

6.  Second,  unco-ordinated  changes  of  weights  in  individual  HICPs  and,  as  a  consequence,  in  the

derived  future  Monetary  Union  area-wide  index  (MUICP)  do  not  facilitate  the  use  of  HICPs  for

analytical  purposes.  The  EMI  therefore  welcomes  the  requirement  expressed  in  Article  3 (5) that

weight  adjustments  are  to  be  introduced  by  all  Member  States  in  January  only.  Moreover,  further

measures  which  enhance  the  transparency  and  limit  the  complexity  of  the  weight  revision

procedures without harming the quality of the future MUICP should be considered.

7.  This opinion will be published in the Official Journal of the European Communities.

16 October 1997