How the ONS is transforming UK prices statistics

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It is an exciting time in the world of inflation statistics, with several important developments due to be implemented in the coming months. Mike Hardie explains what’s changing and what it will tell us about changing prices.  

For several years now the ONS has been going through a process of transformation, reducing our reliance on traditional surveys and using more so-called ‘big’ and ‘administrative’ datasets from the public and private sectors. This has included using VAT returns to calculate GDP, HMRC Tax data to inform our estimates of employment and Visa card payments data to tell us more about consumer spending patterns.  

Now it’s the turn of consumer prices, with important changes to key statistics being introduced in the coming months.  

Firstly, we are introducing substantial improvement to our measure of private household rents.  Access to the microdata has allowed ONS to improve the methodology and produce much more detailed figures. Previously the ONS was only able to produce data broken down to the UK nations and English regions. However, the improved methodology allows the estimates to be broken down to local authority, number of bedrooms and the type of property. 

However, we’ve recently been able to access microdata, which enables us to transform our methodology to make better use of the data. This is allowing a step change in how we produce these key figures.  

Tomorrow we will be publishing new indicative estimates – due to be included in headline statistics next Spring – that will allow us to not only show growth rates, but also consistent price levels right down to local authority level. We will also be able to publish the data broken down by property type. Taken together these will transform  our understanding of changes in the rental market. 

On the same day, we will also be publishing new data using information from Autotrader, giving much more information about the changing costs of second-hand cars; a not insignificant contributor to inflation in recent years. Previously we relied on around 105 second hand car prices but the new source will give us access to 300,000 per month. Previously only an aggregate number for all second-hand car sales was included, but under the new system further breakdowns will be possible, with a breakdown of diesel and petrol car prices being published tomorrow. Replacing our previous estimates from next March, these will be incorporated into our key inflation indices, ensuring it continues to track these important price movements as accurately as possible. 

Also, from next summer, we will begin a full running of our system for collecting and processing supermarket scanner data, which we anticipate will replace much of physical grocery price collection from 2025. At present we collect around 30,000 grocery prices from supermarkets around the country. However, with scanner data we will have access to data from around 50% of prices from across the grocery market, meaning these 30,000 monthly price points will be replaced by around 30 million from supermarket checkouts. While not revealing any information about individuals’ purchases, they will give us incredible new levels of detail about what food is being bought, how prices are changing and what those price changes do to people’s shopping habits. 

Alongside all these significant changes to sources and methods, from next Monday we are also substantially increasing the publication frequency of our Household Cost Indices from annual to quarterly. These are similar to our regular measures of inflation but look directly at what different sorts of households spend their money on and includes items like mortgage interest payments and how much is spent on student loan repayments (as opposed to the overall cost of going to university), which are excluded from traditional inflation measures. We will be producing them for a range of household types such as different income levels, retired households and those with children.   

Taken together, these new measures mark a step change in our approach to measuring price changes and highlights our commitment to ensuring we have the best methods and sources in place to measure our changing and increasing digital economy.  

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Mike Hardie is Deputy Director Prices Transformation Division