CPI ‘does not reflect consumer spending’
The consumer prices index (CPI), which dictates the headline inflation rate, does not take into account a significant proportion of UK spending, it has been suggested.
Britons confused by the apparent difference between their own debts or spending and the official rate of inflation may be interested to read new research from the Alliance Trust.
The firm states that important spending such as mortgage interest payments, council tax and contributions to pension funds are not taken into account in the CPI, but do impact upon finances and consumer debt.
In response, the trust is calling for a more comprehensive measure of UK consumer spending and debt habits to be implemented - replacing the index which currently reflects only 70 per cent of average outlay.
Shona Dobbie, Head of Alliance Trust Research Centre, said: “Since people of different ages allocate varying proportions of their spending to different categories of goods, the percentage of their spending that is captured by CPI can vary considerably.
“This means that CPI is, at best, a partial and over-generalised indicator of the changing pressures on your personal spending.”
Earlier this week the company published findings which suggested that inflation for the elderly is significantly higher, at around four per cent, than the headline rate of 2.8 per cent.
Consumers who would like to take a hold of their finances may wish to seek debt help.
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