Inflation is usually defined as the average rise in prices paid by the ‘average’ consumer. The UK CPI rate of inflation is calculated by using information about how much money was spent on thousands of different goods and services in the previous year. But how applicable is the rate of inflation experienced by the average consumer to our personal experience? We’ve calculated inflation rates for different deciles of household income. We’ve done the same for different age cohorts. Historically, the difference in inflation experienced by different groups has been relatively small. The youngest and lowest income households have tended to experience a slightly higher rate of inflation because inflation has tended to be higher for fuels, food and other commodities which account for a higher proportion of their regular spending.
Interestingly, this year, that trend has reversed. Inflation has been higher in the discretionary goods and services on which wealthier and middle-aged households spend a greater proportion of their income – items such as cars, furniture, UK hotels and recreation.
