Inflation rate gets personal

Inflation rate gets personal

Anyone who thinks the UK's official inflation figures do not reflect the reality of price increases they encounter can check their suspicions from today.

The Office of National Statistics has launched an online personal inflation calculator that works out an accurate rise in individual cost of living.

Inflation has risen to its highest in a decade, mainly on the back of last year's rising oil prices feeding into domestic gas, electricity and petrol prices. Figures out tomorrow are likely to show another rise in December, driven by the increase in petrol duty.

This has led many people, who have seen huge rises in their heating bills, to question whether inflation really hovers between just 2.7% and 3.9%, as suggested by the official measures - the consumer price index and the retail price index.

The ONS's personal calculator should give a clearer idea of the true position. It consists of a template which details how much is spent every month on heating, electrical goods, mortgage repayments and so on. As the details are filled in, the calculator displays a personalised inflation rate over the past two years and plots it alongside the official average rate.

For example, someone living at home and buying mainly clothes and electronic equipment may have a negative rate of inflation since the prices of these products have been falling rapidly. Pensioners spending their money on heating bills and food, both of which have been rising rapidly,.....continued below

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will have a higher than average inflation rate. Gas prices have risen 41% over the past year.

The ONS has been stung by criticism that its inflation figures are unrepresentative of the true rise in cost of living faced by certain sectors of society. The ONS does say that the reason negative perceptions of inflation have been rising may be because the prices of everyday items such as food, gas, petrol and fares have risen faster than big ticket items such as TVs or washing machines.

Jonathan Loynes of consultancy Capital Economics cautioned that the ONS move could backfire if people had their fears confirmed by the calculator.

To work out your real inflation rate go to www.statistics.gov.uk

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