2. Why do we compile the CPI?
In addition to the national CPI, CBS also produces a European harmonised index of consumer prices (HICP). The main difference between these two indices is the scope: the CPI measures price development for the population of the Netherlands, while the HICP measures this for the Netherlands as a whole. The CPI therefore includes spending by Dutch citizens abroad, while the HICP includes spending by foreign visitors in the Netherlands. Because the HICP takes the country as its starting point, the HICPs of the various European countries can be merged into a single European HICP. The HICP also serves as an important reference point for the European Central Bank (ECB). In its efforts to maintain price stability, the ECB bases its monetary policy on the HICP to a considerable extent. Here, too, the primary focus is on change in prices relative to one year previous.
3. Problems affecting the CPI due to the corona crisis
- Consumers’ purchasing behaviour has changed (e.g. hoarding, buying more DIY materials);
- There are obstacles to price observation (it can be more difficult or sometimes even impossible to observe prices);
- Certain services are currently unavailable (e.g. package holidays, hairdressing, a cup of coffee in a café).
For now, the first factor is having no effect on how the CPI is compiled, because we follow the price development of a fixed ‘shopping basket’ of goods and services. In the long term, however, it may have an effect if patterns of consumption alter permanently. As for the second factor, we have not had any major issues with price observation in the Netherlands, although this has been the case in many other countries. The almost complete absence of certain services at present is a unique situation for the CPI and poses a difficult problem for price statistics in general.
In the following sections, we will look at the three factors outlined above in greater detail and examine the solutions that CBS has chosen.
3.1. Changes in consumer purchasing
3.2. Price observation becomes more difficult or even impossible
- Adjustment in line with the price development of a similar product;
- Sticking to the last recorded price (carry forward).
The second method can be useful when estimating the price of a product or service with a very stable price development. If the price of museum admission is missing from the observation, for example, it is reasonable to assume that it will be the same as it was last month.
3.3. Discontinuation of services
As soon as these services are offered once again and consumers are free to use them, we will revert to using the current prices. As with the methods described in Chapter 2, the current price level and the calculated price development between the post-corona period and the pre-corona period reflect reality. This is an important condition when deciding which method to use.
1) COICOP stands for Classification of Individual Consumption by Purpose.
2) CPI – Achtergrond jaarlijkse basisverlegging 2020 [Background to Annual Base Shift 2020] (only available in Dutch)
4. Publication of the CPI and the HICP
4.1. Publication for the CPI
To give users an insight into the assumptions we have made and to identify the values we have imputed in order to compile the CPI as a whole, we will be publishing a separate monthly customised table from April 2020 . This table shows the method we employ for each missing service and the value we impute for the index. This gives our users an understanding of the choices we are making and the impact they have on the results.