ECB: Impact of Including OOH in Annual HICP Since 2011 Between -1.2 and +0.4 Points

11 March 2024

By David Barwick – FRANKFURT (Econostream) – The inclusion of owner-occupied housing (OOH) in annual euro area HICP would impact the latter in an amount between -1.2 and +0.4 points, the European Central Bank said on Monday.

In a statistics paper on how to reflect OOH in HICP, the ECB said that the ‘net acquisition’ approach to including OOH, which is consistent with the inclusion of other durable goods, ‘could result in bigger differences in future, should the fluctuations in the housing market cycles in the euro area be more pronounced and synchronised.’

Two alternative methodologies, ‘rental equivalence’ and ‘user cost’, rely on assumptions about per-period costs, leading to ‘weaknesses and measurement issues’, the ECB noted.

‘In general, the empirical evidence suggests that including OOH based on the rental equivalence approach decreases the cyclicality of the new inflation index, while the net acquisition approach implies a small amplification of its cyclical properties compared to the HICP’, the ECB said.