Measuring UK Inflation: Practical Differences and Issues

Colin Ellis

Published: December 2012

Inflation is a key economic indicator that affects all economic agents. But the mechanisms by which price data are captured and aggregated are less uniform than might be expected, and there are a number of practical issues that can affect measured inflation rates. Focusing on UK data, this article examines the differing processes for measuring consumer prices, producer prices and other measures of inflation. It considers the data collection process at the microeconomic level, how sampling and aggregation methodologies vary, and the implications and impact that different averaging techniques can have on the same underlying data. It also discusses how the aggregation process can affect the time series properties of headline inflation.