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Britain has a new headline measure of inflation

Britain has a new headline measure of inflation

IN 1946 the government convened a committee to assess the official cost-of-living index, which had been introduced in 1914. The conclusion was damning. The “alterations in consumption habits since 1914 have made the official index out-of-date”, it noted, recommending that it be “terminated”. The measure was hardly in touch with how ordinary folk spent their money; beer was excluded from the calculations.

Statisticians have been grasping towards a better measure of inflation ever since. In March the Office for National Statistics (ONS) introduced a new headline measure, “consumer-prices index including owner-occupiers’ housing costs” (CPIH). On July 31st the CPIH received the seal of approval from the UK Statistics Authority. The new index may be the most sophisticated so far. But it is still an imperfect gauge of changes to living standards.

The longest-running measure of inflation in Britain is the retail-prices index, introduced in 1947. The RPI, which includes…Continue reading

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