Statistics Finland said on Thursday that it had made a persistent error in calculating inflation figures since the autumn of 2022, resulting in reported figures that were higher than they should have been.
The error in the inflation figures may have affected some people’s benefits and pensions.
The scale of the error is indicated by the preliminary August inflation figures, where the error was corrected for the first time.
In the August figures, the correction reduced inflation according to the harmonised consumer price index by 0.7 percentage points. In other words, without the correction, inflation would have appeared to be almost one percentage point higher.
Price of electricity counted twice
Many social benefits, such as the national pension, basic allowance, income support and pensions, are pegged to the official inflation rate, so these erroneously “inflated” figures may have affected increases in payments.
The error in the inflation figures may have had some impact on salary negotiations as well – and possibly even politically in the run-up to last spring’s election.
The official monthly inflation rate peaked at 9.1 percent in December.
Statistics Finland's chief actuary Kristiina Nieminen said that the error was due to the price of electricity, with an increase in prices erroneously taken into account twice within the electricity price index. Last autumn, spiking electricity costs linked to fears of winter shortages were a significant driver of overall inflation.
In September 2022, Statistics Finland began to calculate the electricity price index based on its own survey, which takes into account exchange electricity as well as fixed and open-ended contracts. Electricity became more expensive in November, and at that time the price increase was taken into account in the index for the second time.
"Unfortunately, in retrospect, we noticed that our time series is at the wrong level compared to the actual situation," said Nieminen.
On Thursday, the state number-cruncher reported that the year-on-year change in consumer prices was 5.6 percent in August, down from 6.5 percent in July.
However, it admitted that the decrease from July to August was mostly caused by the adjustment of the price index of electricity – which was still incorrect in July.
The errors will be reflected in inflation figures until next July, because the reference figure for the current year is incorrect. However, in line with international regulations, the consumer price index will not be adjusted retroactively.