The news says inflation is 4%. Nobody paid 4% more for anything. Somewhere, thousands of price tags became one number, and the recipe is worth knowing.
Rent10%
Bread2%
Rent went up 10% this year and bread went up 2%. If those were the only two things anyone bought, what is inflation?
Yes.The figure leans towards whichever thing takes more of people's money. Two prices and no spending shares is not enough to say where.
Not quite.The biggest rise is not the figure. If bread were nearly all of spending, 10% on rent would barely register.
Not quite.The middle would be right only if people spent exactly as much on bread as on rent. Almost nobody does.
Rent50%
Bread50%
Half of all spending is rent, half is bread. Rent rose 10%, bread rose 2%. What is the inflation figure?
%
Take half of each rise and add them.
Yes.Half of 10 plus half of 2. Each rise counts in proportion to what people spend on it. The figure is a weighted average, and the weights are the recipe.
Rent rose 10% and everything else rose 2%. Change how much of people's spending goes on rent.
Rent rose10%
Everything else rose2%
The inflation figure3.6%
20%Rent still rose 10% and everything else still rose 2%. The figure is 3.6%.
Rent rose10%
Everything else rose2%
The inflation figure5.2%
40%Rent still rose 10% and everything else still rose 2%. The figure is 5.2%.
Rent rose10%
Everything else rose2%
The inflation figure6.8%
60%Rent still rose 10% and everything else still rose 2%. The figure is 6.8%.
Rent rose10%
Everything else rose2%
The inflation figure8.4%
80%Rent still rose 10% and everything else still rose 2%. The figure is 8.4%.
Rent's rise never changed. What made the inflation figure move?
Not quite.Everything else stayed at 2% throughout. The third bar climbed while the first two stood still.
Yes.Same two rises, four different figures. The only thing that moved was the share of money going to the thing that rose most.
Not quite.Rent rose 10% in every frame. Look at the first two bars: neither of them moved.
Move the control to see what changes.
How many separate prices does the UK's statistics office check each month to make the figure?
Commit to one. Nothing is scored — this is here so you have a number in your head before you see the real one.
Kinds of thing in the basket700
Prices checked each month180,000
About 180,000.On around 700 kinds of thing, from shops, websites and bills, every month. Then each rise is weighted by what households spend on it, and the whole month becomes one number.
Four price rises in one year, with how much of each pound people spend on them. Tap the one that moves the headline figure MOST.
Tap the part of the figure that answers it.
Multiply each rise by its share of spending.
Rent — 30p of every £1 spent5%
Eggs — 1p of every £140%
Petrol — 6p of every £115%
Eating out — 10p of every £18%
How much each price rose.
Rent
Yes.A 5% rise on 30p of every pound adds 1.5 points to the figure. The smallest rise here is the biggest mover, because of its weight.
Eggs
Not quite.Forty per cent is the biggest rise and the smallest mover: on 1p in the pound it adds 0.4 of a point. A huge rise on a tiny share is a headline, not a figure.
Petrol
Not quite.Fifteen per cent on 6p in the pound adds 0.9 of a point. Second place, and it feels bigger than that because everyone sees the price on a sign.
Eating out
Not quite.Eight per cent on 10p in the pound adds 0.8 of a point. Close to petrol, and well behind rent.
Put the recipe in order: from price tags to one number.
Tap them in order — first to last.
Choose the basket→Collect the prices→Work out each rise→Weight by spending→One number
Yes.The weighting step is the one people forget, and it is where most of the arguments about the figure live.
The inflation figure is an average with weights. The weights are what an average household spends. Change the weights and the same price rises give a different number.
A pint9%
The whole basket3%
A newspaper says: inflation is 3%, but a pint has gone up 9%, so the official figure must be wrong. What is the newspaper missing?
Not quite.It is. The basket is built from what people actually buy, and beer is very much on that list. Being in the basket is not the same as being the basket.
Not quite.It is calculated every month from that month's prices. Being a month old is not what makes it differ from the pint.
Yes.An average of 700 things is not a claim about any one of them. Some of the 700 rose more than 9%, and some fell.
Lesson complete
The inflation figure is an average with weights, and the weights are the recipe.