FRANKFURT (MktNews) - The expansion of the basket of goods and services covered by the German harmonised consumer price index (HICP) to include certain health and social service costs could cause the index to be slightly higher than it would be otherwise, the Federal Statistics Office said Friday.
Because health and social service costs have posted above average price increases in recent years, the change will likely raise the rate of harmonised inflation above would it would have been without these items included, according to analysts,
The additions could ultimately raise the HICP calculation by about 0.02 percentage point, according to an estimate by Industrial Bank of Japan analyst Ulla Kochwasser. While small by itself, this increase could be magnified by rounding effects.
The index changes, already partly reflected in German January HICP data, will not come into full effect until December 2001, as HICP is a chain-weighted index, Stats Office Expert Guenther Ebel told Market News International. On chain-weighted indexes it takes a year for the full impact to filter through, because the thrust from the changes has a cumulative effect of one twelfth of the final weighting each month.
Beginning with January 2001, a range of hospital services like operations, hospital stays and nursing services as well as patients' co-payments for hospital stays are included in German HICP with a weighting of 0.6%.
In addition, old age nursing costs -- both in institutions and at home -- as well as home delivery of meals to the elderly will be included, with a weighting of 1.3% in the HICP.
The hospital services will be added to the health care subindex, which rose 0.2% m/m in January. The other items will be included in the subindex for "other goods and services" which rose by 0.7% m/m in January.
The change increases the similarity between German HICP and the national CPI, with HICP now covering 90% of the goods and services in the national index, The only HICP category not found in national CPI are old age nursing costs, home meal delivery for the elderly and child creche costs.