Analytics, Inflation, Lithuania

Average annual rates of change in prices for consumer goods and services calculated based on the HICP

Annual the decreased in prices for consumer goods and services calculated based on the HICP (March 2010, against March 2009) stood at 0.4%, that calculated based on the CPI –0.2%.

In March 2010, against February, the decrease in prices for consumer goods and services calculated based on the HICP made 0.3%, and tallied with that calculated based on the CPI.

Rates of change in prices for consumer goods and services calculated based on the HICP

Based on the Eurostat’s recommendations, for the calculation of annual, average annual, monthly and other periods’ inflation, HICPs calculated based on the 2005 index reference period with two decimals are used. Price indices are published with one decimal.

DIFFERENCES BETWEEN THE HICP AND CPI

The main differences between the HICP and CPI are as follows:

Purpose. The HICP is the instrument for measuring inflation in the EU and making comparisons on the international scale, as well as for the calculation of the European Index of Consumer Prices (covers 27 EU Member States), the Monetary Union Index of Consumer Prices (covers 16 countries: Ireland, Austria, Belgium, Greece, Spain, Italy, Cyprus, Luxembourg, Malta, the Netherlands, France, Portugal, Slovenia, Slovakia, Finland, Germany) and the European Economic Area Index of Consumer Prices (covers 27 EU Member States, Iceland and Norway). The CPI is used to measure the inflation rate in the country. It is the key instrument for indexation.

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

Weights. Due to a different coverage of consumption expenditure, weights used for the HICP and CPI calculation differ. This is the primary factor affecting the value of the index.

Classification. For the calculation of the CPI, the Classification of Individual Consumption by Purpose (COICOP) is used. The COICOP/HICP classification has been adjusted for the calculation of the HICP.

Notes

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

Annual inflation shows relative changes in the average price rate between the current month and corresponding month of the previous year.

Average annual inflation shows relative changes in the average price rate between the average of the latest twelve months and average of the corresponding previous twelve months.