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Hi I'm Richard Campbell, myself and my team work at the Office for National Statistics
and we work out inflation. So what is inflation?
Well it's a measurement that tells us whether the goods that we buy and the services that
we use are getting more or less expensive over time. Take this chocolate bar a few years
ago it cost 10p, now its cost 20p that's inflation.
If we talk about how inflation is measured, it should be easier to understand.
Think of a giant shopping basket, now fill it with everything that you buy.
There is your basic staples such as milk and bread, your regular costs such as petrol and energy
bills, your big ticket items such as cars and fridges
and the fun things in life such as beer and holidays.
Every month we collect 180,000 prices for 700 goods and services. To do this we collect
prices from 20,000 shops in 141 locations through out the UK and we also get prices
using the internet and phone.
Every year we update the basket of goods and services to reflect changes in the sort of
things people buy, but your everyday staples like bread and milk are always in there.
We analyse all of these 700 items and 180,000 price quotes and check to see if whether cost
more or less than they did a month ago.
So how was it reported?
So if you hear that inflation stands at 2.5% this means that the price of a shopping basket
that £100 a year ago, costs £102.50 today.
The next thing you will usually hear is why has inflation changed. For example inflation
dropped from 2.7% to 2.5% due to prices for airfares and clothing. What this means is
that changes in prices of airfares and clothes are largely responsible for inflation changing.
This doesn't mean that they are the main causes of inflation, in fact there generally not.
As the main causes of inflation in other words what makes up the 2.5% remains the same from month
to month.
It probably comes as no surprise that the main causes of inflation in recent years include
food prices, utility bills and the cost of filling up your car.
So now you know how inflation is calculated and what the numbers mean. You probably think
that these numbers don't reflect your own personal circumstances and you probably
be right.
Your personal inflation is determined by what you buy not what everybody buys. So unless
you happen to buy everything that's in the inflation basket of goods and services, it's
quite likely that you will experience a different rate of inflation.
For example we include gas heating, electricity heating, kerosene and coal in the basket because
some people use each of those to heat their house, I doubt that anybody uses all of them.
So if you want to find out more about inflation, check out the ONS website www.ons.gov.uk