You might only know about the government’s index rate, but Google’s just announced its own price index and there’s even one for the ridiculously well-off. So where do you fit into all this?
Prices are rising. September’s official consumer prices index (CPI) inflation rate is 3.1%. Until recently, the government used a different measure, called the retail prices index (RPI) which is currently 4.6%.
The difference between CPI and RPI might not seem much, but it matters because the government has decided to use September’s CPI as the yardstick for public sector pension increases in 2011. It’s even going to impact many benefit rates.
All in the nation’s shopping basket
So what do these figures actually mean? Well, CPI and RPI are both worked out by comparing prices for an imaginary basket of goods over a 12-month period. The difference between the two rates is that RPI takes account of housing costs, like mortgage interest payment and housing depreciation – CPI doesn’t.
The contents of the government’s ‘basket’ are updated each year to reflect our lifestyles and buying habits. So this year garlic bread replaced pitta bread, lip gloss replaced lipstick and Blu-ray players were added.
There’s an index for everything
But it’s not just government indexes that matter – there’s been some entertaining measures popping up of late.
Most recently, Google has come up with a measure if its own – the Google price index (GPI) – to compare online prices. Its inventor admits this index is more selective than government measures, but claims that the real-time nature of online data-gathering makes it more up to date.
Another American index is the Cost of Living Extremely Well (CLEWI), calculated by Forbes magazine since 1976. This tracks the prices of 40 luxury goods and services, from fur coats and caviar to Lear jets and New York lawyers. This year the price of a Steinway grand piano fell by 15% and the price of cigars remained unchanged. Hmm, not one to affect most of us.
There was even an amusing correlation made last week between the number of emotional posts on Twitter and the Dow Jones index. Apparently, the gauge of emotions, such as ‘anxious’ or ‘friendly’, bares an uncanny resemblance to movements on the stock market.
How do you compare to government indexes?
A lot of us feel that our own rate of inflation is higher than the government figure. The Office for National Statistics agrees and has an online calculator so you can work out your personal rate.
It works by taking into account how much you spend on a number of key items, from food and heating to transport and holidays. If an item that makes up a big share of your total spending has gone up sharply during the last 12 months, it drives up your ‘personal rate’. If one of these falls, it drags it down. Give it a go and see where you stand in comparison – my rate was about average last time I checked, but how about yours?
Do you think official rates give the whole picture, or should another measure, such as wages, be used to set pension and benefits? Will Google’s initiative help, or are there already too many measures?