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Consumer Price Index

CSO examining how to show 'disproportionate' impact of soaring inflation on poorer families

Campaigners have warned that soaring inflation is hitting lower-income households differently.

THE CENTRAL STATISTICS Office will consider whether it can reflect the disproportionate impact of price increases on lower income groups amid soaring inflation rates.

Concerns have been raised that the CSO’s Consumer Price Index (CPI) does not reflect how a sharp rise in the cost-of-living affects certain households in Ireland.

The index is a measure of the average prices of a range of goods and services and tracks how these prices change over time.

The statistics agency’s latest CPI showed that prices were on average 5.5% higher in December than they were in December 2020.

But the St Vincent de Paul has warned that the index does not show how cost-of-living increases affect households on lower incomes when prices of essentials rise quicker than headline levels of inflation.

The latest CPI showed that increases in the energy sector made the second-largest contribution to inflation over the course of the year, with gas, electricity and home heating bills rising by 11.8% in the twelve months to December.

“When food and energy prices increase at a much greater pace, the proportion of a person’s income that is spent on those is greater for people on low incomes,” SVP’s Head of Social Justice and Policy Dr Tricia Keilthy said.

“In real terms, what that means and what we’re seeing is that people are having to cut back.

“We’re taking calls from people who, for example, are on prepaid electricity metres and who maybe would have gotten five or six days of gas and electricity supply for 20 or 30 Euro last year. Now they’re having to top up the metre after two or three days again.

“Transport is another big one, particularly for households living in rural locations where public transport just isn’t an option.

“We’ve had calls from people who literally have to make a choice between putting petrol in the car to get to the shop or to get the kids to school.” 

Keilthy added that if the CSO could reflect the impact of inflation on those with lower incomes, it may lead to appropriate policy responses to mitigate poverty.

In a briefing to The Journal, CPI statistician Colin Cotter explained that the CPI is calculated as an average for all Irish households and that the real impact of inflation on each person is different. 

“Every household has its own unique consumption pattern and therefore its own personal experience of inflation,” he said.

“It would be impracticable to calculate an index for every household. However, some statistical offices have provided ‘personal inflation calculators’ on their websites, in which users can enter a broad outline of their expenditure pattern.

“The CSO will consider whether a feature like this could be included on its website, to engage more directly with the public about inflation.”

Cotter also said it would be possible to calculate a ‘personal’ CPI index using weights from the Household Budget Survey, which includes data on the consumption patterns of households at different income levels.

The CSO’s last Household Budget Survey was carried out in 2015/16 and the next survey is expected to be conducted over the course of 2022/23, when it will be used to update the CPI basket and weights at the end of next year.

“At that point the CSO will also be able to analyse the feasibility and technical implications of producing price trend statistics for subgroups of the household population, e.g. lower income households, pensioners, renters,” Cotter added.

It comes after Office of National Statistics (ONS) – the CSO’s UK equivalent – confirmed earlier this week that it would do more to show the effects of inflation on specific income groups.

The ONS also measures inflation by looking at the cost consumer items from a number of different price points, but said it would look at ways to capture the impact of price increases on households with different incomes in future.

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