Why the average is not your rate
- Rent and bus fares12%Petrol−5%Everything else3%
Two households live on one street. One rents its home and takes the bus. The other owns its home and drives. This year rents and bus fares rose 12%. Petrol fell 5%. Everything else rose 3%. Both households shop at the same shops and see the same prices.
- +12%The renter: 40p of every £1 on rent and buses, which rose−5%The owner: 10p of every £1 on petrol, which
Made-up shares. Same street, same shops, two different rates. The official figure is a weighted average. The weights are what an average household spends. No real household spends exactly like that. The renter puts a big share of its money into rent and bus fares, which rose 12%. The owner puts some into petrol, which fell. So each household gets its own rate.
- Rent and bus fares12%Petrol−5%Everything else3%
Rents and bus fares rose 12%, petrol fell 5%, everything else rose 3%. Which household feels more inflation?
Both the same. Inflation is one number.
Not yet. It is one number for the average household. Neither of these two is average, and neither of them pays the average.The driver, because petrol is expensive.
Not yet. Petrol is expensive and it fell. A big number that went down pulls the driver's rate below the average, not above it.The renter, because more of their spending is in the things that rose.
Right. The same price list hits the two households differently, because each spends its money on different things. A big share of the renter's money goes on the things that rose 12%. - Rent30%
- Everything else70%
Any household's rate is made the same way as the official one, from its own shares. Multiply each rise by its share of the money, then add the results. Say 30p of every £1 goes on rent, which rose 10%, and the rest on things that rose 2%. That is 3 plus 1.4: a rate of 4.4%.
- Heating and food50%
- Everything else50%
A pensioner is someone who has retired and lives on a pension, money paid to them each month. Half of their spending is heating and food, which rose 12%. The other half rose 2%. What is their rate?
%Take half of each rise and add them.
Right. Half of 12 plus half of 2. In a year when the official figure might say 5%, this household is living at 7%, and both numbers are honest.- Food and energy30%
- Everything else70%
The official figure uses what an average household spends. In this lesson that household puts 30p of every £1 into food and energy. A household that spends a bigger share on those, in a year when they rise fastest, gets a rate above the official one. A household that spends a smaller share gets a rate below it.
Everything else rose 3%. Set how much of YOUR spending goes on food and energy, and how much those two rose.
The official figure3.6%Your rate3.4%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 20% · Food and energy rose by: 5%
You spend 20% on food and energy, which rose 5%. Your rate is 0.2 points BELOW the official figure.
The official figure5.1%Your rate4.4%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 20% · Food and energy rose by: 10%
You spend 20% on food and energy, which rose 10%. Your rate is 0.7 points BELOW the official figure.
The official figure8.1%Your rate6.4%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 20% · Food and energy rose by: 20%
You spend 20% on food and energy, which rose 20%. Your rate is 1.7 points BELOW the official figure.
The official figure11.1%Your rate8.4%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 20% · Food and energy rose by: 30%
You spend 20% on food and energy, which rose 30%. Your rate is 2.7 points BELOW the official figure.
The official figure3.6%Your rate3.7%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 35% · Food and energy rose by: 5%
You spend 35% on food and energy, which rose 5%. Your rate is 0.1 points ABOVE the official figure.
The official figure5.1%Your rate5.4%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 35% · Food and energy rose by: 10%
You spend 35% on food and energy, which rose 10%. Your rate is 0.3 points ABOVE the official figure.
The official figure8.1%Your rate9%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 35% · Food and energy rose by: 20%
You spend 35% on food and energy, which rose 20%. Your rate is 0.9 points ABOVE the official figure.
The official figure11.1%Your rate12.4%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 35% · Food and energy rose by: 30%
You spend 35% on food and energy, which rose 30%. Your rate is 1.3 points ABOVE the official figure.
The official figure3.6%Your rate4%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 50% · Food and energy rose by: 5%
You spend 50% on food and energy, which rose 5%. Your rate is 0.4 points ABOVE the official figure.
The official figure5.1%Your rate6.5%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 50% · Food and energy rose by: 10%
You spend 50% on food and energy, which rose 10%. Your rate is 1.4 points ABOVE the official figure.
The official figure8.1%Your rate11.5%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 50% · Food and energy rose by: 20%
You spend 50% on food and energy, which rose 20%. Your rate is 3.4 points ABOVE the official figure.
The official figure11.1%Your rate16.5%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 50% · Food and energy rose by: 30%
You spend 50% on food and energy, which rose 30%. Your rate is 5.4 points ABOVE the official figure.
The official figure3.6%Your rate4.3%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 65% · Food and energy rose by: 5%
You spend 65% on food and energy, which rose 5%. Your rate is 0.7 points ABOVE the official figure.
The official figure5.1%Your rate7.6%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 65% · Food and energy rose by: 10%
You spend 65% on food and energy, which rose 10%. Your rate is 2.5 points ABOVE the official figure.
The official figure8.1%Your rate14%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 65% · Food and energy rose by: 20%
You spend 65% on food and energy, which rose 20%. Your rate is 5.9 points ABOVE the official figure.
The official figure11.1%Your rate20.6%The official figure assumes an average household: 30% on food and energy. Share of your spending on food and energy: 65% · Food and energy rose by: 30%
You spend 65% on food and energy, which rose 30%. Your rate is 9.5 points ABOVE the official figure.
When does your rate sit ABOVE the official one?
Whenever food and energy rise a lot.
Not yet. A big rise lifts the official figure too. At 20% of spending you stayed below the average however hard food and energy rose.Whenever your share on food and energy is above the average household's 30%, and those prices rose faster than the rest.
Right. Both things have to be true. The gap is the extra share times the extra rise, so it is biggest in the corner where both are biggest.Never. The official figure includes everyone.
Not yet. It is built from everyone's spending added together. No single household spends that way, so no single household gets that rate.Move both controls.
A year when rents rose 15% and everything else rose 2%. Tap the household that felt the LEAST inflation.
Tap the part of the picture that answers it.
Student renting a room45%Family renting a house35%Young professional renting a flat20%Retired couple who own their home0%Share of each household's spending that goes on rent. Retired couple who own their home
Right. No rent, so none of the 15% reaches them. Their rate is the 2% everything else rose, and the year's biggest price rise passes them by.Student renting a room
Not yet. Nearly half their money goes on the thing that rose most. Their rate is close to 8%, four times the couple's.Family renting a house
Not yet. A third of their spending took the 15%. Their rate is over 6%, three times the couple's.Young professional renting a flat
Not yet. A fifth on rent gives a rate near 4.6%. Less than the student, still more than double the couple's.- £15,000 a year40%£30,000 a year28%£60,000 a year18%£120,000 a year11%
Share of spending that goes on food and energy, by income. Made-up numbers. Everyone has to eat and keep warm. A household with less money still buys food and heating, so those two take a big share of what it spends. A household with more money spends a smaller share on them, and more on everything else. These shares are made up, but the pattern is real.
In a year when food and energy rose 20% and everything else rose 3%, change the household's income.
Share of spending on food and energy40%This household's inflation rate9.8%Household income: £15,000 a year
40% of spending on food and energy. This household's rate is 9.8%.
Share of spending on food and energy28%This household's inflation rate7.8%Household income: £30,000 a year
28% of spending on food and energy. This household's rate is 7.8%.
Share of spending on food and energy18%This household's inflation rate6.1%Household income: £60,000 a year
18% of spending on food and energy. This household's rate is 6.1%.
Share of spending on food and energy11%This household's inflation rate4.9%Household income: £120,000 a year
11% of spending on food and energy. This household's rate is 4.9%.
In a year when food and energy lead the rises, who feels the higher rate?
Lower incomes, because food and energy are a bigger share of what they spend.
Right. A rate is worked out from shares, not from pounds. The household with the least money has the most of it in the things that rose, so its rate is highest.Everyone the same. The prices are the same for all of them.
Not yet. The prices are the same for everyone. The shares are not, and it is the shares that turn one price list into a different rate for each household.Higher incomes, because they spend more pounds.
Not yet. They pay more pounds and get a smaller rate. A rate is measured as a share of spending, and most of what they spend rose 3%.Move the control.
- Rent8%Food6%Electronics−4%Clothes−2%The average2%
A minister says: inflation is 2%, so the pressure on families is over. That month rents rose 8% and food 6%, while electronics and clothes fell. Who is the 2% true for?
An average household. A family spending mostly on rent and food is well above it.
Right. The falls in electronics and clothes pull the average down. A family that spends mostly on rent and food gets almost none of that relief.Everyone. It is the official figure.
Not yet. It is official and it is an average. An average can be exactly right and still match nobody in the room.Nobody. The figure is wrong.
Not yet. The figure is right about the average basket. The mistake is the sentence after it, which treats an average as a fact about each family.
Lesson complete
Nobody's basket is the average basket, so nobody's rate is the official one.