Consumer-price indices are meant to reflect the cost of typical baskets of goods and services. The euro area’s have a big omission. They capture rents paid by tenants, but not the costs of buying and owning property—even though two-thirds of people in the zone own their homes. As Benoît Cœuré, who until recently sat on the ecb’s board, pointed out, the bank’s chosen measure “captures only marginally the largest single lifetime expenditure of households”.
In fact, euro-area statisticians do calculate the cost of buying and owning a home. Adding it to price indices could raise measured inflation by 0.2-0.3 percentage points, notes Davide Oneglia of ts Lombard, an investment-research firm. That is nothing to sneeze at when official inflation is only 1.3%…
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
