Statistisches Bundesamt Consumer price index of Germany General information February 2013 Periodicity: irregular Published in 20.02.2013 For further information about this puplication please contact: Phone: +49 (0) 611 / 75 47 77; Fax: +49 (0) 611 / 75 36 22; www.destatis.de/contact © Statistisches Bundesamt, Wiesbaden 2012 Reproduction and distribution, also of parts, are permitted provided that the source is mentioned. Introduction The consumer price index for Germany (CPI) measures the average price changes of all goods and services purchased by households for consumption purposes. Up to 2002, the index was known and published as the "consumer price index for all private households in Germany". The renaming, however, did not involve any content-related modifications. In addition, the – index of retail prices and the – harmonised index of consumer prices are compiled for Germany. Consumer price indices for specific types of households for both the "former territory of the Federal Republic" and the "new Länder and Berlin-East" (discontinued indices) are not computed anymore. At regular intervals (usually every five years), the consumer price index is revised, which means that the index computation is based on more recent patterns of household consumption. At the same time, the survey catalogue is revised systematically and some methodological changes are carried out. The indices are recalculated from January of the new base year, with the new index figures replacing the previously published results for that period. Results dating back even further are not recalculated but only formally rebased using the new base year. In the reference month January 2013, 2010 was adopted as the new price base year, replacing the previous base year 2005. The new weighting pattern will remain unchanged until the next scheduled revision. Measuring index changes From the point of view of consumers, changes in the index from one point in time to another (calculated as percentage changes) can be interpreted as the general rate of price change. The index development in terms of percent can be computed by the following formula: ((new index position / previous index position) • 100) – 100 Calculation of amounts of money If the index development requires that a new amount of money be calculated, the following formula is to be used: (former amount • new index position) / previous index position = new amount Measuring changes in the purchasing power Changes in the purchasing power of the money consumers have at their disposal can also be calculated by means of the consumer price index. The following formula is to be used: ((previous index position / new index position) • 100) – 100 The results of all these calculations are independent of the base year selected, except for some minor differences due to rounding. Statistisches Bundesamt 2 Using indices in stable-value clauses Consumer price indices and indices of retail prices are often used as reference values in stable-value clauses of tenancy, lease, delivery, pension and other agreements on continuous payments. Users of stable-value clauses laid down in contracts which are based on discontinued indices will need to recalculate the stablevalue clauses on the basis of the consumer price index for Germany. The Federal Statistical Office offers a range of services to help you with these calculations, some of which require a lot of work. You will find an interactive program on the internet at www.destatis.de/wsk/, which provides mathematical support to help you with the adjustment of stable-value clauses. Apart from the changeover from discontinued indices to the consumer price index for Germany, the program will enable you to compute rates of change for calendar months and calendar years (starting and ending dates flexible). In addition, detailed German-language instructions are available for download from www.destatis.de Zahlen & Fakten Preise Verbraucherpreisindizes Wertsicherungsklauseln (Anleitung für die Berechnung …) or can be ordered by calling +49 (0) 611 / 75 47 77. As an additional service at a charge of EUR 30.-, we offer to carry out the changeover calculations for you. In that case, you will be required to complete a German-language form, which you can obtain: – on the internet at www.destatis.de Zahlen & Fakten Preise Verbraucherpreisindizes Wertsicherungsklauseln (Formblatt) – by using our faxback service: +49 (0) 611 / 75 36 22 – by calling +49 (0) 611 / 75 47 77 We would like to point out, however, that there will be no difference between calculations carried out by us and calculations you make online. The German-language leaflet on point-based stable-value clauses versus percentage-based stable-value clauses offers information for contracting parties using such clauses. It too can be found on the internet at the address cited above (Merkblatt). Alternatively, it can be ordered by calling +49 (0) 611 / 75 47 77. A separate leaflet containing instructions on the use of retail prices indices in stable-value clauses can also be ordered by calling either of the two telephone numbers listed above. Information on the relevant legal provisions The German law on extrajudical services of justice (Rechtsdienstleistungsgesetz, RDG) does not authorise the Federal Statistical Office (Destatis) to provide any legal counselling or any services beyond mere mathematical support. As regards queries about consumer price indices and their application in stable-value clauses, Destatis must restrict itself to providing general technical and methodological advice. If you need specific advice please contact your lawyer or notary public or a consumer agency. In this context, we would like to draw your attention to the expert opinion on "Änderung des Verbraucherpreisindex; Auswirkungen auf Wertsicherungsklauseln" (Changes in the consumer price index: impact on stable-value clauses) of the German Notarial Institute (DNotI), which was published in the DNotI Report No. 2/2003. You will find the report on the following web-page: http://www.dnoti.de/Report/2003/rep0203.htm The legal provisions concerning stable-value clauses are laid down in the Price Clause Act (PrKG) of 7 September 2007 (Federal Law Gazette I, pp. 2246, 2247) and in Article 557b of the Civil Code (BGB) concerning "index-linked rents". With the introduction of the new Price Clause Act, the former procedure for authorisation by the Bundesamt für Wirtschaft und Ausfuhrkontrolle (Federal Office of Economics and Export Control) is no longer required. Statistisches Bundesamt 3 Tips concerning the agreement of new stable-value clauses • We recommend you to base new stable-value clauses on the consumer price index for Germany and to convert existing clauses with a long remaining life in accordance with this index. How appropriate is the harmonised index of consumer prices (HICP)? Since the mid-1990s, a harmonised index of consumer prices (HICP) has been calculated for Germany. The HICP was developed with the aim of making price change rates comparable at international level and of merging them to form an overall inflation rate for the European area and the European Monetary Union. This price index will be further developed in the coming years. The primary objective behind producing this index is to measure inflation. Hence, applying this index as a compensatory measure to contracts with stable-value clauses is not impossible but rather complicated. • To reduce the problems involved with the changeover to a new base year, it is also advisable to express changes in percent – not in points. In such cases the price base year is of no importance. • Consumer price indices are calculated for calendar months and years, but not for reference dates. A wording like "the index effective on 1 January 2000" often leads to interpretation-related legal disputes and should be avoided by all means. All the information provided here describes adequate procedures from a statistical point of view. How to deal with old stable-value clauses that are based on points The services we offer concerning stable-value clauses are deliberately designed to provide support for the calculation of point-based clauses only if they do not go beyond December 2002 as the starting point of the calculation. As far as later adjustments are concerned, we recommend you to compute changes only in terms of percent. Contracting parties will be independent of the regular conversion to new base years only if they agree on stable-value clauses that are based on percentage changes. The Federal Statistical Office will not confirm the mathematical accuracy of any calculations in terms of points that are made by the contracting parties themselves. Rebasing factors as mathematical support to facilitate a changeover to another base year have neither been calculated nor published since 2003. For more than one decade now, we have urgently recommended that contracts with point-based stable-value clauses should be converted to a percentage basis and that percentage-based clauses should be stipulated in any new contracts. This will eliminate the crucial disadvantages of point-based clauses, namely the complicated method of calculation, results that are often difficult to interpret, and the systematic discrimination of one contracting party. Statistisches Bundesamt 4 Annex: Explanation of some frequently needed calculations Calculation of the percentage change when changing over to the consumer price index for Germany (latest adjustment prior to December 1999), including a model calculation We want to calculate the percentage change over the period from June 1998 (reference month) to January 2013. The previously applied index is the consumer price index for a 4-person household of wage earners and salaried employees with medium income in the former territory of the Federal Republic. 1. At first, compute the rate of change (RCh) of the discontinued index on which the contract was based up to December 1999: (previous index (12/1999) / previous index (reference month)) • 100 – 100 = RCh1 Example: (round to one decimal place) (105.2 / 104.3) • 100 – 100 = 0.9 % "Previous index" here means the respective points level of the previously applied index; "RCh1" refers to the percentage rate of change of the previously applied index up to December 1999. 2. In the second step, compute the rate of change of the consumer price index for Germany as of December 1999: (current CPI (2010=100)) / CPI 12/1999 (2010=100)) • 100 – 100 = RCh2 Example: (round to one decimal place) (104.5 / 85.0) • 100 – 100 = 22.9 % "CPI" here refers to the respective points level of the consumer price index for Germany; RCh2 denotes the percentage rate of change of the consumer price index for Germany as of December 1999. 3. Calculating the overall percentage change: ((RCh1 /100) + 1) • ((RCh2 /100) + 1) • 100 – 100 = Overall percentage change Example: ((0.9 / 100) +1) • ((22.9 / 100) +1) • 100 – 100 = 24.0 % If you round the outcome to one decimal place, you will get exactly the same result as obtained from the interactive program. The indices applied in the formulas are available for free at the Destatis website at: www.destatis.de Publikationen Thematische Veröffentlichungen Preise Verbraucherpreisindex, Harmonisierter Verbraucherpreisindex Lange Reihen ab 1948. How to calculate with annual averages? If your contract is not based on monthly index positions but on annual averages, you will have to use the respective annual averages for "previous index (reference month)" and "current CPI (2010=100)" instead of the monthly values. Statistisches Bundesamt 5