The measurement of inflation in Austria: a historical overview

Calculation of the first price indices at the international level began as early as the start of the 18th century. In Austria, consumer price indices (CPIs) have been consistently available since 1800. Though simple, the indices followed today’s basic structure, and chaining the various generations of indices allows for conclusions to be drawn on inflation rate trends, adjustments for inflation and indexation for a period now spanning more than 200 years. This article covers a historical period extending from the first calculations of inflation to the complex criteria that determine inflation measurement in Austria today. A historical analysis of the trend in Austrian household expenditures as a key determinant of the basket-of-goods structure of price indices illustrates the long-term shift in spending from basic necessities to upscale goods and services. In 2016, Austrian households are spending only around 25 % of their total expenditure on basic necessities. Over the past 100 years, the number of items in the basket of goods and services has increased 40-fold (from 20 to approximately 800 items), and the number of price reports that are included in the monthly inflation calculations has risen from fewer than 100 to more than 40,000 in 2016. Another point of focus is the causes of measurement inaccuracies – which have always existed in the calculation of inflation – and the methods for correcting them. Austria’s accession to the EU and, subsequently, Economic and Monetary Union (EMU) with its supranational monetary policy instigated a process of restructuring and, more importantly, harmonizing inflation measurement. The Harmonised Index of Consumer Prices (HICP), which has been computed since 1996 to supplement the national indices, is now the primary indicator of inflation under the Eurosystem’s monetary policy strategy. Finally, this article concludes with a discussion of the measurement factors required to be used in the calculation of the Austrian CPI and HICP under EU law as well as the conceptual differences still existing between these two inflation parameters.