Lesson 04 · 4 min · 6 things to do
Why the average is not your rate
The official figure says 4% and your own costs went up 9%. Neither of you is wrong. Your basket is not the average basket.
- Rent and bus fares12%Petrol−5%Everything else3%
Two households on one street. One rents and takes the bus. The other owns its home outright and drives. Rents and bus fares rise 12%, petrol falls 5%, everything else rises 3%. Who feels more inflation?
- Not quite.Petrol is expensive and it fell. A big number that went down is pulling the driver's rate below the average, not above it.
- Not quite.It is one number for the average household. Neither of these two is average, and neither of them pays the average.
- Yes.The same price list hits two households differently, because each household is a different recipe of that list. The renter's recipe is heavy on the 12%.
Everything else rose 3%. Set how much of YOUR spending goes on food and energy, and how much those two rose.
The official figure (an average household, 30% on food and energy)3.6%Your rate3.4%20% · 5%You spend 20% on food and energy, which rose 5%. Your rate is 0.2 points BELOW the official figure.
The official figure (an average household, 30% on food and energy)5.1%Your rate4.4%20% · 10%You spend 20% on food and energy, which rose 10%. Your rate is 0.7 points BELOW the official figure.
The official figure (an average household, 30% on food and energy)8.1%Your rate6.4%20% · 20%You spend 20% on food and energy, which rose 20%. Your rate is 1.7 points BELOW the official figure.
The official figure (an average household, 30% on food and energy)11.1%Your rate8.4%20% · 30%You spend 20% on food and energy, which rose 30%. Your rate is 2.7 points BELOW the official figure.
The official figure (an average household, 30% on food and energy)3.6%Your rate3.7%35% · 5%You spend 35% on food and energy, which rose 5%. Your rate is 0.1 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)5.1%Your rate5.4%35% · 10%You spend 35% on food and energy, which rose 10%. Your rate is 0.3 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)8.1%Your rate9%35% · 20%You spend 35% on food and energy, which rose 20%. Your rate is 0.9 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)11.1%Your rate12.4%35% · 30%You spend 35% on food and energy, which rose 30%. Your rate is 1.3 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)3.6%Your rate4%50% · 5%You spend 50% on food and energy, which rose 5%. Your rate is 0.4 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)5.1%Your rate6.5%50% · 10%You spend 50% on food and energy, which rose 10%. Your rate is 1.4 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)8.1%Your rate11.5%50% · 20%You spend 50% on food and energy, which rose 20%. Your rate is 3.4 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)11.1%Your rate16.5%50% · 30%You spend 50% on food and energy, which rose 30%. Your rate is 5.4 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)3.6%Your rate4.3%65% · 5%You spend 65% on food and energy, which rose 5%. Your rate is 0.7 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)5.1%Your rate7.6%65% · 10%You spend 65% on food and energy, which rose 10%. Your rate is 2.5 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)8.1%Your rate14%65% · 20%You spend 65% on food and energy, which rose 20%. Your rate is 5.9 points ABOVE the official figure.
The official figure (an average household, 30% on food and energy)11.1%Your rate20.6%65% · 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?
- Not quite.A big rise lifts the official figure too. At 20% of spending you stayed below the average however hard food and energy rose.
- Yes.Both things have to be true. The gap is the extra share times the extra rise, which is why it grows fastest in the top-right corner.
- Not quite.It includes everyone and describes no one. An average of many recipes is a recipe nobody cooks.
Move both controls to see how they work against each other.
- Heating and food50%
- Everything else50%
Half of a pensioner's spending is heating and food, which rose 12%. The other half rose 2%. What is their rate?
%Yes.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.A year when rents rose 15% and everything else rose 2%. Tap the household that felt the LEAST inflation.
Tap the part of the figure 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
Yes.No rent, so none of the 15% reaches them. Their rate is the 2% everything else rose, and the year's biggest story passes them by.Student renting a room
Not quite.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 quite.A third of their spending took the 15%. Their rate is over 6%, three times the couple's.Young professional renting a flat
Not quite.A fifth on rent gives a rate near 4.6%. Less than the student, still more than double the couple's.Illustrative shares: the less a household earns, the more of its money goes on food and energy. In a year when food and energy rose 20% and everything else rose 3%, change the income.
Share of spending on food and energy40%This household's inflation rate9.8%£15,000 a year40% 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%£30,000 a year28% 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%£60,000 a year18% 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%£120,000 a year11% 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?
- Yes.A rate is a share, not a sum. The household with the least money has the most of it in the things that rose, so its rate is highest.
- Not quite.The prices are the same. The recipes are not, and the rate is the recipe applied to the prices.
- Not quite.They pay more pounds and a smaller rate. Inflation is measured against what you spend, and most of what they spend rose 3%.
Move the control to see what changes.
Inflation is an average with weights, and nobody's basket is the average one. Whoever spends most of their money on the things that rose feels the most.
- 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?
- Yes.The falls in electronics and clothes pull the average down, and a family that buys mostly rent and food gets almost none of that relief.
- Not quite.It is official and it is an average. An average can be exactly right and describe nobody in the room.
- Not quite.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.
Next: Small rates, long years →