Changes in energy prices and wage costs can, to the extent these are passed through to consumer prices, have important effects on HICP inflation excluding energy and food (HICPX). Data from different sources can be matched to obtain the cost shares of energy and wages in various sectors. Since the importance of changes in input costs is likely to increase with the share of such costs in the overall input costs or in the production of a service or a good, this information allows HICPX inflation to be broken down into indicators for energy-sensitive and not energy-sensitive items, as well as into contributions from wage-sensitive and not wage-sensitive items. The energy-sensitive HICPX inflation indicator derived in this way illustrates the important role of the energy shock in HICPX inflation developments over the last few years. Similarly, the indicator for wage-sensitive HICPX inflation signals an important role for wages as a driver of underlying inflation in the euro area, especially more recently. The two indicators have little overlap – which helps in interpreting their signals.
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