Big data on cars and rail fares to power UK inflation measures
For the first time in decades inflation is a major issue again. Supply chain issues linked to the pandemic, rising fuel costs and shortages linked to the war in Ukraine have all combined to push the growth in prices to levels not seen since the early nineties. In this post Mike Hardie explains how the ONS is updating the production of UK inflation statistics to give the most detailed picture yet of how prices are changing and who they’re affecting.
For many years the way we produced inflation figures was relatively straightforward. Using a range of sources on household spending we carefully selected 700 items that represented typical household outgoings – from the cost of teabags to a holiday – and then using our team of price collectors, closely monitored these prices by checking if and by how much the price and size and quality changed across over 140 locations and online each month.
This gives us a good overall picture of how prices are changing across the UK. However, using this approach doesn’t easily allow us to see how prices are changing in different parts of the country, for people of different incomes, or to what extent people switch brands when the price of one particular item shifts.
Last year we announced radical plans to take data directly from supermarket tills, giving us far more information on exactly how much of each item was being bought and where, so we can know much more about the way prices and spending habits are changing. We will be releasing initial estimates using this information in June 2023 and bringing these data into our headline inflation numbers in just under two years from now.
In addition, we’ve also published details today of our plans to use data from Auto Trader on second-hand car prices and information from the Rail Delivery Group on rail ticket sales. These data will increase the number of monthly price points we use on second-hand cars from around 35 popular car models at three different ages to around 400,000 car listing prices, and the number of rail fare price points to 30 million from an aggregated single annual estimate produced by the Office of Rail and Road.
These data will give us new insights into the reasons behind changing prices, and the potential to better understand trends, for example, by region for rail fares, or by fuel type for cars. We will be publishing experimental estimates using these sources in June, and then bringing them into our headline inflation measures from 2023. You can find more information on these data and our timelines, including planned publications, in our article released today: Transformation of Consumer Price Statistics: April 2022.
In addition, we’re also continuing to develop our Household Costs Indices (HCIs). These are slightly different to traditional inflation measures and look directly at the changes in spending by different household types, such as retired or low-income households. As well as those items included in headline consumer inflation, it includes additional items, such as direct changes in mortgage interest payments, and insurance costs paid by households. HCIs also use a different method of weighting together price changes, which give all households an equal weight. We are publishing updated HCIs next month, which will help shine a light on how different types of households are being impacted by rising prices.
Finally, many people have queried how the recent hikes in the cost of living have impacted those on the lowest incomes. While in the medium term the introduction of scanner data will help us understand shopping patterns better, it will not directly answer this question. So in the short term, we are developing the Least Cost Index. This is being published in early this summer, using data ‘scraped’ from the major supermarkets’ websites to show how the cheapest cost of food items commonly bought by those in the lowest income households are shifting each month. This will give much better information about how those on the lowest incomes are being affected by changes in the cost of staple food items.
In addition, you can see how increases in inflation may have affected your household by using our personal inflation calculator which will show you how increases in the cost of living have affected you in the past year.
Understandably the issue of rising prices is firmly in everyone’s sights. Here at the ONS we are working hard to ensure our statistics are able to show clearly how rising prices are feeding through to different people around our country. Further details of our plans can be found in our recent article: The cost of living, current and upcoming work: March 2022, which will be updated on 10 June.