Page last updated at 10:02 GMT, Monday, 15 September 2008 11:02 UK

Inflation calculator FAQs

Full details and help for using the personal inflation calculator.

What is the inflation calculator?

The personal inflation calculator is a tool allowing you to enter how much you or your household spends on key items, and find out an estimate of your personal inflation rate.

This estimate can be regarded as a more accurate indication of how inflation effects you than a measure of overall national inflation, like the Retail Prices Index (RPI), the long-standing and familiar domestic measure of inflation, the uses of which include calculation of pension payments, state benefits and private contracts.

Although the calculator is based on the RPI, the calculator works by making adjustments to it based on differences between an individual's, or individual household's, spending patterns and the national pattern.

The calculator works at a fairly broad level and makes its calculations using figures entered, so the personal inflation estimate it gives should be regarded as a guide.

The Office for National Statistics (ONS) originally devised the calculator and provides monthly RPI data to keep it up-to-date. The actual form you fill in and the accompanying map were developed by the BBC and are not the responsibility of or in anyway connected to the ONS.

How do I fill out the calculator?

The calculator entry area is divided into three sections - monthly and annual spending, and housing costs.

Each section has a range of fields - such as food, council tax and property value or rent - for which a figure should be entered using numbers, not words. It is not necessary to include a sign at any point.

More details on what should be included and excluded from the figures entered for the different fields is available on the calculator by hitting the + button next to where it says "How to fill in this section".

After entering all figures possible, hit the calculate button, and you will be shown your personal annual inflation estimate. The annual RPI figure will be shown for comparison.

Further down you have the opportunity to plot your personal inflation estimate plus a comment on our map, along with other users, to help us build up a national picture.

How are the results arrived at?

The calculator allows users to calculate an inflation rate based on their personal expenditure patterns, rather than the averages used in published statistics.

It does this by weighting together price indices from the RPI each month using an individual's spending pattern to arrive at a personal inflation rate. It also uses the latest available average house price data by region, which is sourced externally.

Is the calculator accurate?

Remember that the calculator only adjusts for differences between an individual's or individual household's expenditure patterns and the national pattern at a fairly broad level.

It is not practical to produce an index which precisely reflects an individual's or individual household's inflation experience.

To reflect an individual's inflation rate precisely would require account to be taken of the following effects, each of which may raise or lower the price change experienced by a particular individual compared with the national average:

  • Pattern of expenditure within each high level expenditure group
  • Choices of brand and variety of product
  • Choices about where to shop
  • Regional variation in prices
  • Shopping behaviour - shifting from brand to brand seeking out special offers or sticking with discounts etc.

What happens to the information I type in?

At no stage is any information about your spending transferred to the BBC or ONS.

When using the calculator, the information you type in stays on your internet browser, where the calculations also take place.

After using the calculator and receiving your personal inflation estimate, you are invited to plot this on our map. Any information you give us at this stage - such as your personal inflation estimate, name and location - is treated according to our terms of use. It is not passed to the ONS.

What is inflation?

Inflation is the rate of change in the level of prices for goods and services, which affects the purchasing power of money.

What is a personal inflation rate?

The official consumer inflation figures (RPI and CPI) measure the change in prices charged for goods and services bought by households in the UK. It is based on average spending patterns for UK households. A personal inflation rate reflects the impact of changing prices on an individual, taking account of their personal spending pattern.

So people who spend relatively more on items with higher price increases, such as petrol and food, will have a personal inflation rate that is higher than the CPI or RPI.

Similarly, people who spend relatively more on items with lower price increases, or even price decreases, will experience a lower personal inflation rate (examples of such items include computers, audio visual equipment and clothing).

Why does the calculator ask for some item costs but not others?

The list of specific items has been simplified to make it easier to provide the details.

Each item included in the RPI is assigned a specific weight, based on the levels of expenditure on each (those with the largest weight have the greatest influence in the calculation of inflation).

The items included in the monthly costs section are those which are likely to have a large influence on the overall inflation figure.

Items such as CDs have a relatively low weight, so while regularly purchased they have less of an impact on the RPI than, say, chemists' goods.

This simplification does mean that the personal inflation figure is less precise than it would be if more detail were provided.

Why do I have to enter accommodation expenses?

Accommodation expenses are needed to estimate mortgage interest payments and depreciation, both of which are major components of the RPI and therefore account for a significant portion of a household's expenditure.

Why do I have to enter where I live?

This information is required because the calculator is updated each month with the latest available average house price data by region. These data are then used in the estimation of annual depreciation.




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