ONS struggles to avoid crisis of confidence in UK inflation data

Britain’s national statistician is trying to avoid a crisis of confidence in official data in response to claims that headline measures of inflation underestimate the impact of rising prices on the poorest.

The Office for National Statistics said on Wednesday it would re-release detailed data on inflation rates experienced by different types of households later this week. The analysis was suspended at the start of the pandemic because prices for many items, such as dining out or flights, were temporarily unavailable.

But as the average inflation rate rises, the question of who will be hit hardest by the rising cost of living becomes more pressing at the highest speed in 30 years In December, even if the government moves to limit the rise in regulated energy prices, it could rise above 6% in the coming months.

ONS came under fire last week from food blogger and poverty activist Jack Monroe, who claimed its headlines on Twitter “Seriously underrated” Those on the lowest incomes face the reality of inflation, as prices for basic food items rise faster than those for premium food items.

Monroe, who was invited to meet with ONS officials, is calling on volunteers including economists, retail analysts and former ONS staff to compile her own basic food price index.

Rival indices are surging, and a dispute over the actual rate of inflation has complicated an already stressful wage negotiating season as unions advocate for higher wages to compensate workers for the higher cost of living. Unite plans to produce its own “bargain index”, which it claims will better reflect the actual cost of living and the ability of employers to pay higher wages.

Mike Hardie, head of inflation statistics at the ONS, said: in the blog While the ONS has “aggressive” plans to start using data sent directly from supermarket checkouts to collect millions of prices a month, the agency has yet to answer “what will happen to the prices of private label vs. branded roasted beans” problem, not 180,000 as it is now.

But Hardy said that even major changes in the prices of certain food items would have a small impact on headline inflation, as they make up a tiny fraction of average household spending.

The debate goes far beyond food prices. Inflation rates are sometimes higher for low-income people because they tend to spend a higher percentage of their income on necessities like fuel and food, whose prices can fluctuate sharply. That was the case in 2008-2009, Hardie said, although the historical differences were small.

An analysis by the Institute for Fiscal Studies think tank based on November data found little difference in the cost increases faced by households on both ends of the income distribution – as the prices of luxury goods such as dining out and travel have risen rapidly, as well as necessities.

But the IFS warns that if energy and other prices climb as expected, the poorest decile of households will be hit much harder than the richest decile as they spend almost as much on gas and electricity. three times its budget. That would leave them facing headline inflation about 1.5 percentage points higher than the wealthiest.

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