Is inflation making you poorer

UK-inflation 2000-2012Prices in the UK are rising at their slowest rate of 2.4% since the end of 2009, official figures have shown, due to falling food, fuel and clothing prices.

However, your personal rate of inflation may not match the official rate of inflation. How to get a more accurate picture of how inflation affects you?

You can use the calculator which was developed with the Office for National Statistics (ONS). Information entered is safe, as it stays on your computer. Here is the link: http://news.bbc.co.uk/1/hi/business/7610430.stm

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. 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.

What do my results mean?

Your personal inflation rate reflects the impact of changing prices on you or your household, taking into account your personal spending pattern.

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

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

The inflation calculator deals only with your expenditure and does not include your income. If your total income is not increasing at the same rate as your personal inflation rate, then you will be worse off.