The headlines tell us inflation is now above 10 per cent (10.4 per cent, actually). But what does that mean?
It means that something that cost us £1 last year now sets us back £1.10.
But food writer Jack Monroe has long protested that the way inflation is calculated means we’re not getting the full picture.
Back in January 2022, when inflation was actually lower, Jack said the people in charge of working out the rate weren’t taking into account higher rises at the lower end of price ranges.
Now the ONS, which makes the calculation, has said it is working out a new way to keep track of prices.
It’ll look at data from supermarket and shop tills. That means it’ll get a truer snapshot of what the majority of us are actually buying and how much we’re paying.
In the meantime Jack has been sharing real-life price rises on Twitter.
For example, this time last year a kilo of the cheapest rice was 45p. Now, at the same supermarket it’s £1 for half the amount. That’s a rise of 344 per cent – a bit more than the five per cent we’ve been hearing about.
Not only that, but stores’ basic ranges have been cut right back as supermarkets struggle to deal with the price rises themselves.
From hundreds of basic range items a few years ago, chains are now down to just double figures.
Across an entire supermarket of food, that’s not offering very much choice. And it means that for many products, we’ll have to switch up if we want to keep buying them.
Ten per cent is a record high for inflation – the government aims to keep it below two per cent. Otherwise it’s hard for us to plan our spending and for businesses to know what prices to charge.
In fact, if inflation strays more than a percentage point from the two per cent target, the governor of the Bank of England has some explaining to do. They have to write to the Chancellor and explain how they’re going to bring it back in check.
(Some inflation is seen as a good thing though. Although prices falling in the shops sounds like it should help us all out, when we spend less employers can go bust and people lose their jobs.)
The inflation rate has been in the spotlight not just because it’s higher than the target. It’s not even very accurate.
It’s calculated by the Office for National Statistics (ONS), based on a ‘shopping basket’ of 720 typical things we might buy.
Except up until now they haven’t been that typical. To be fair, they do move with the times and mix it up to reflect our changing shopping habits. The most recent basket includes hand sanitiser, for instance.
But the focus has been on what people with a bit more cash might be buying. For example, they’ve also added in smartwatches and smart wifi lightbulbs – items that anyone on a tight budget can only dream of.
So, the actual rate of inflation for those of us on low incomes is really much higher than 8 per cent.
Which is why the plan to keep track of what shoppers are really buying with supermarket data is good news.