Euro Area Inflation Estimated at 4.0%

At 4% Euro Area inflation is very similar to the U.S. Inflation rate.

On June 30, 2008 the Eurozone released what they call a “Flash” estimate of their inflation rate for the month of June. It is provisional and could be modified before the final release. But they claim it is 95% accurate.

Calculating Inflation in the EuroZone is more complex than for a single country. Their individual country inflation calculations are called HICPs (Harmonised Indices of Consumer Prices).

Current Euro Area Inflation Chart (1 Yr) %CODE3%

Chart courtesy of www.rivaluta.it

While the combined inflation rate is called “The Monetary Union Index of Consumer Prices” (MUICP) which is a weighted average of member states using their individual HICPs and combining them based on country weights which are computed every year reflecting the country’s share of private final domestic consumption expenditure in the EMU total.

Here is the basic substance of the June 30th  Release:

Flash estimate – June 2008

Euro area inflation estimated at 4.0%

Euro area1 annual inflation2 is expected to be 4.0% in June 2008 according to a flash estimate issued by Eurostat, the Statistical Office of the European Communities. It was 3.7% in May3.

Computation of flash estimates

Euro area inflation is measured by the Monetary Union Index of Consumer Prices (MUICP). To compute the MUICP flash estimates, Eurostat uses early price information relating to the reference month from Member States for which data are available4 as well as early information about energy prices.

The flash estimation procedure for the MUICP combines historical information with partial information on price developments in the most recent months to give a total index for the euro area. No detailed breakdown is available. Experience has shown the procedure to be reliable (14 times exactly anticipating the inflation rate and 10 times differing by 0.1 over the last two years). Further information can be found in Eurostat News Release 113/2001 of 5 November 2001.

1.  The Member States of the euro area are Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia and Finland.
2.  Annual inflation is the price change between the current month and the same month of the previous year.
3.  See News Release 85/2008 of 16 June 2008.
4.  The MUICP flash estimate usually includes early price information representing approximately 95% of the euro area total consumption expenditure weight (see News Release 53/2006 of 28 April 2006).

Issued by Eurostat Press Office