The consumer prices index (CPI) – the Government’s measure of inflation – was 3.7% in December, up from 3.3% in November. Over the same period the retail prices index (RPI) is currently running at 4.8% up from 4.7% in November.
The inflation rate experienced by everyone is not necessarily 3.7%. Only if your expenditure exactly matches the goods in the CPI basket – and in the same proportion – will your personal rate of inflation match CPI.

To determine if your personal rate of inflation is higher or lower than CPI you need to look at the risers and fallers….

The largest upward pressures to the change in CPI annual inflation came from:

• The weighting of air transport in the index calculation was higher in 2010 compared to 2009.
• The prices of fuels and lubricants increased this year by 2.8%, the largest rise for a November to December period since 1996. Judging by fuel prices in January this upward trend will continue.
• Average gas bills rose in December due to some of the major energy suppliers increasing their tariffs. Average gas bills were unchanged between November and December 2009
• Food prices rose by 1.6 % this year, the largest ever rise between a November and December period (between the same two months last year, prices increased by 0.8%). Most notable were vegetables, bread, cereals, milk, cheese and eggs for their increase in price.

The largest downward pressure to the change in CPI annual inflation between November and December came from:

• The price of furniture and furnishings rose by only 0.6% between November and December this year compared with an increase of 4.2% a year ago. 

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in November was above the provisional figure for the European Union. At 3.3% the UK rate was well above EU’s overall rate of 2.3%.

At Proposito Financial Planning we calculate personal inflation rates for our clients.  To find out to calculate your personal rate of inflation give us a call on 0845 345 3536 or email us at info@proposito.co.uk