Measuring inflation

Abstract

Consumer price indexes measure the change in prices charged for goods and services bought for consumption by households in the UK. The Office for National Statistics publishes two main measures of consumer inflation, the consumer prices index (CPI) and the retail prices index (RPI). The latest UK inflation figures, for May 2008, show the CPI rising by 3.3 per cent and the RPI rising by 4.3 per cent. It is clear from reports in the media that people are seeing big rises in the cost of food and fuel and are questioning the accuracy of official CPI and RPI rates. The consequence has been that newspapers are producing their own, selective, cost of living indexes, undermining confidence and trust in the official figures. This article explains how the official figures are compiled and looks at why some people think that the estimate of inflation should be higher. [ABSTRACT FROM AUTHOR]