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Poorest households suffer highest inflation

Which? finds average CPI figures mask reality

Stacks of coins

Britain’s poorest households are suffering from higher rates of inflation than official statistics suggest, according to new Which? research.

These findings originate from the Which? Lived Inflation Index, which is based on the government’s Consumer Price Index (CPI), but takes into account differences in spending patterns between households.

The index indicates the poorest households are experiencing higher levels of inflation than the richest households. In the year to July 2014, prices rose 1.8% for the poorest households, compared to 1.5% for the richest households.

Those differences mount up over the years. Looking at inflation since 2008, the impact on households suffering high inflation is equivalent to additional costs of £450 a year, compared to households experiencing the lowest inflation rates.

Find out more: How to make your money work harder – 10 budget-stretching tips

Rising costs of essentials

Matthew Oakley, head of economic analysis at Which?, explained: ‘Households who experience higher inflation rates tend to spend a higher than average proportion on utilities and rent, and have been more heavily impacted by the above average rises in the cost of essentials.

‘Our analysis shows that inflation is not experienced equally by all households and that the standard headline figures can mask how households in reality are impacted by changing prices, because households spend their money on different things.’

Find out more: 10 ways to save on your energy bills – tips to make your home more energy-efficient 

How does inflation affect you?

Which? Consumer Insight has launched an interactive online tool – the Lived Inflation Index tracker – based on the research. 

The tool is designed to provide policymakers and Which? researchers with a greater insight into how inflation is affecting consumers. You can also use it to find out how inflation is affecting your type of household.

The latest CPI figures state that annual inflation fell to 1.6% in July.

Chart showing inflation for different groups

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