About inflation...

Inflation is actually a decrease in the purchasing value of money, expressed by the consumer price index. Consumer prices have a key importance in the life of all economic and social actors. Inflation allows the calculation of real values from nominal ones. As shown in the next figure too, consumer price changes considerably influence the real value of average net earnings.

Change in real value of average earnings

Price changes are measured using a consumer basket made up of properly selected items of goods and services, following up price changes month by month. After computing the sub-indices for the many different groups of goods and services (food, clothing and footwear, electricity, gas and other fuels etc.) the consumer price index is obtained - by weighting the sub-indices - as the final result, summarising the price changes of goods and services in one figure.

The consumer price index - because of different consumption patterns - is calculated for many different groups of consumers, such as social groups with low or high income level, and pensioners.

The impact of the different consumption pattern of this latter significant stratum of households is reflected by the consumer price index for pensioners. Because of their structure of expenditures and their needs, the situation of pensioners is basically influenced by three consumption groups (food, medicine, expenditures on housing). The share of these three distinguished groups of goods and services is some 62% in the consumption basket for pensioners, while this proportion is 47% in the consumption basket for the population as a whole. In 2010 it is the consumption pattern observed in 2008 that is used to calculate the consumer price index.

To make data comparable at international level, the member states of the European Union calculate harmonised indices of consumer prices (HICP), which produce similar but not perfectly the same results as national consumer price indices.

The European Central Bank considers prices stable if the increase of consumer prices does not exceed 2%. One of the conditions of introducing the common currency is that the increase of the consumer price level (inflation) in the year examined should not exceed by more than 1.5 percentage points the average index of the three member states with the lowest inflation rate. In 2009, prices rose by 1% on average in the 27 member states of the EU. Prices decreased last year in three countries (Spain, Portugal and Ireland), while stagnation was recorded in Luxembourg and Belgium. The lowest inflation was measured in France, Germany, Estonia and Cyprus, while the highest in Romania (5.6%), Lithuania (4.2%), Poland (4%) and Hungary (4%).