There is currently a lot of interest in how much prices are rising. Today we’re publishing experimental inflation numbers for Northern Ireland. Here Chris Jenkins looks at our work to develop these figures with the Consumer Council for Northern Ireland as well as explaining why it’s not as easy to produce inflation data for the nations and regions as you might think.
There is a lot of attention on how much prices are rising. At the ONS, we measure inflation through our monthly consumer price inflation statistics as well as providing further analysis to explain how prices impact the cost of living, and how they affect different types of households.
Given the level of interest in inflation, one question being asked is how inflation differs across the country? Our headline measures of consumer inflation are designed to measure the national picture, so a basket of goods and services is selected that is representative of spending across the UK as a whole. This process is designed to give reliable estimates of inflation at the UK level.
The question is naturally asked why you can’t use the same data to calculate a set of comparable regional consumer price indices? The simple answer is that we don’t have a sufficient set of prices available within each nation and region to allow us to calculate a robust measure of inflation at this granular level. Additionally, the ‘basket of goods and services’ we currently use is representative of the UK, but not necessarily any one individual nation or region.
For example, there may be different spending patterns in the various regions of the UK, different trends in what people consume and different preferences for items and brands being purchased. This means, for a robust and representative set of regional indices, we would need to develop regional baskets. All of this would require us to significantly increase the amount of price and spending data we currently collect.
We have carried out some research recently, in partnership with the University of Southampton, to investigate the relative quality of regional consumer inflation indices using our existing data. As expected, there were significant concerns in the quality and volatility of resulting indices.
We have plans, though, to investigate how regional measures of consumer price inflation may be developed in the future. Today, in collaboration with the Consumer Council for Northern Ireland, supported by the Department for the Economy we have published some information on the steps we have taken to overcome the limitation of having small price-sample sizes within regions. We have boosted the Northern Ireland price collection and reconsidered some of the challenges that come with it. We have also published early indicative estimates of consumer price inflation in Northern Ireland from January to June 2022. However, it should be noted that the methodology is at an early stage of development, and so the results presented in section 2 are indicative and highly experimental at this point.
In addition to this, next year we plan on updating our periodic analysis of regional price levels across the UK. This analysis will provide an indication of a region’s price levels for a set of goods and services compared with the UK average.
As already mentioned, we are also in the process of transforming our consumer inflation statistics to use data from supermarket checkouts. This will see us move from using around 180,000 price points each month to hundreds of millions, a move that may allow us to overcome some of the challenges associated with the development of regional indices and aid the production of indices for the nations and regions much.
You can find out more about our long-term transformation programme here.