What is Your Inflation Rate? Discover with the Personal Inflation Calculator

RELIABLE SOURCES

This calculator incorporates data from trusted sources in the UK, US, and Japan. The information is derived from the following sources:

1. UK Office for National Statistics

2. US Bureau for Labour Statistics

3. Statistics Bureau of Japan

EFFECTIVE METHODOLOGY

Which measures of inflation are used by the calculator?

Various measures of the Consumer Price Index (CPI) are considered. Each country employs the following measures:

• UK: CPIH, which encompasses the CPI and imputed rental costs for homeowners

• US: CPI-U (not seasonally adjusted), which tracks price changes for urban consumers nationwide (approximately 93% of the US population) and includes imputed rental costs for homeowners

• Japan: CPI, which involves the CPI along with imputed rental costs for homeowners

How should irregular purchases like flights or appliances be entered?

For optimal use of the inflation calculator, we recommend focusing on regular monthly spending. The inflation experienced with one-off purchases depends on the timing. This approach provides insight into your personal inflation trend, reflecting the rate of inflation for your monthly basket of goods and services. However, for national inflation rate comparison, irregular purchases are excluded.

Nevertheless, you can still use the calculator to determine your personal rate of inflation through alternative methods:

1. Entering your actual spending from the previous month, including any irregular purchases. By inputting all expenses in each category, including irregular purchases made last month, you can assess the present impact of inflation on your personal finances. Your personal inflation trend will reflect the rate of inflation experienced for making the exact purchases as the previous month in previous months.

2. Using the monthly average values of all your spending. This approach allows for inclusion of regular monthly spending and an average “cost per month of use” for irregular purchases. It facilitates comparing your personal inflation rate with the national inflation rate, although it may not accurately represent the inflation experienced during an irregular purchase.

How should housing costs be entered for homeowners?

For this calculator, enter your expenses on mortgage payments and home insurance under “Rent/mortgage,” while repairs and home improvements should be included in “Homeware and maintenance.” Collectively, these entries act as a proxy for owner occupiers’ housing costs.

Measuring inflation rates for owner occupiers can be complex since property purchase is considered an investment and a service. Consumer price indices handle this differently.

In this calculator, we have utilized CPI measures incorporating the service costs of home ownership for homeowners through the method of “rental equivalence.” This approach employs the rent an owner would have to pay for their property as a substitute for the housing services it provides.

Are all spending items included in consumer price indices?

No, consumer price indices generally exclude spending on the following products: investments, cash gifts (including donations and tips), gambling, charges for credit, interest payments on loans, and taxes unrelated to consumer goods and services.

Does the calculator account for price variations among different items?

No, the calculator does not consider the location-specific purchase of products within a country. For example, housing cost inflation is based on a national average rather than price fluctuations in your area.

How are national inflation rates calculated?

Although there may be slight variations across countries, national inflation rates are generally determined through the following key steps:

1. Price collectors record prices for the same set of products on a monthly basis from a representative sample of shops across the country, including online retailers.

2. Price changes for specific products at specific shops are consolidated to calculate an overall price change for each type of item, indicating relative price changes over time.

3. Items are weighted to reflect their relative significance in the overall shopping basket. Weights are typically determined based on average household expenditure and are periodically updated (every one to two years) to reflect changes in consumer behavior.

4. The consumer price index is calculated by taking a weighted average of the price changes.

How is my personal inflation rate estimated?

Your personal inflation rate is calculated similarly to the national inflation rate, but with some simplifications:

1. The calculator collects and calculates the latest 12-month price indices data as well as historic data for each spending category from the relevant national statistics authority of the selected country.

2. Based on the spending inputs you provide, the calculator determines the weight that should be assigned to each category’s price inflation.

3. The calculator then emulates the calculation performed by the national statistics authority to generate an overall personal inflation rate for every month since January 2021 until the most recent month with available data. During this process, the calculator assumes that the proportion of your spending on each category remains unchanged each month.

Please note that the personal inflation rate figure produced by the calculator may include a rounding error, as it is derived from published figures that have been rounded by the national statistics authority.

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