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The Consumer Price Indices (CPI) cover the monetary expenditure on goods and services for final consumption, for all types of resident households, with the exception of institutional households, in order to provide as relevant and accurate a picture of inflation as possible. The CPI can be regarded as a method for broadly measuring the prices of a fixed expenditure pattern.
As the most used measure of the general evolution of prices, the Consumer Price Index is often employed in the contracts concluded in the business environment and by the government for adjusting the income, pensions and/or taxes, with a view to taking into account the evolution of prices (indexation clauses, also known as escalation clauses).
The most frequent situations where these escalation clauses apply are related to the private sector and involve collective bargaining agreements, rental agreements, insurance contracts with automatic protection against inflation, alimony and child benefits.
When requesting information on price indices for the indexation of contracts, a statistical data user should consider the following aspects:
- the Consumer Price Indices are calculated on a monthly basis and measure the evolution of prices from one period to another (the monthly series are available beginning with October 1990);
- he/she should know and accurately indicate the base or reference period of the index (it cannot be a calendar day) and the interval at which the indexation is to take place;
- he/she should know and accurately indicate the adjustment/indexation frequency (monthly, quarterly, half-yearly, yearly etc.). It is useful to establish and know the method employed to calculate the indexation coefficient. For example, when a yearly indexation takes place and there is no clear information on the method for calculating the indexation coefficient, different results may be obtained depending on whether, in order to calculate the indexation coefficient, the evolution of prices in a particular month compared to the same month of the previous year is taken into account or it is estimated on the basis of the annual average (the average of the last 12 months compared to the average of the previous 12 months);
- he/she should inform himself/herself about the scope of the payment base with a view to accurately identifying the index to be used;
- he/she should select the adequate index or indices. They should be carefully chosen in order to optimally represent the item subject to indexation and the intention of the parties;
- on July 1, 2005, the national currency of Romania, the leu, was redenominated at a conversion rate of 10,000 ROL to 1 new Romanian leu.
For more details, access http://www.bnr.ro/Denominare-1335.aspx.
| Calculation formulas for updating values by using the Consumer Price Index (expressed as percentages): |
| A. by using the Consumer Price Index: |
| A= |
Initial sum to be updated * CPI |
|
| 100 |
|
| or |
| B. by using the inflation rate: |
| B= |
Initial sum to be updated * Inflation Rate |
+ Initial sum to be updated |
| 100 |
| We mention that the results of updated sums are the same, either using the consumer price index or the inflation rate because Inflation Rate = CPI - 100 |
| Taking into account that the CPI is published with two decimal places and the inflation rate is published with one decimal place, the result obtained by separately applying the two methods may be different due to rounding. |
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Disclaimer
The purpose of these explanations is to summarise the information on the Consumer Price Indicators published by the NIS and on some aspects that should be taken into account by the users when they decide to employ such indices in the indexation clauses. It is merely a brief description; it is not a comprehensive or exhaustive presentation of price indices or of the aspects that should be considered by the persons when they decide to use price indices or indexation clauses.
For all the aspects regarding the unitary and different manner of using the statistical data published or provided by the NIS, it is recommended that the persons who request this information resort to independent professional advice.
In accordance with its legal obligations under Law 226/2009 on the organisation and functioning of official statistics in Romania, as subsequently amended, the NIS shall respond to all the statistical data requests made by the users (legal or natural persons) in an independent manner, without any interference and without assuming an advisory role in the disputes arising from the interpretation of a court decision.
The NIS cannot provide assistance as regards the questions about the manner of using and applying the contract indexation/adjustment clauses. The NIS can only provide assistance as regards the questions about the technical methods and aspects on which the building of statistical indicators was based. |
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