02 June 2022
Go to release: Estimated Inflation by Household Characteristics March 2022
The Central Statistics Office (CSO) has today (02 June 2022) published a research paper that presents new estimates of inflation broken down by various household characteristics up to March 2022. This publication is categorised as a CSO Frontier Series Output. Particular care should be taken when interpreting the statistics in this research paper as it is based on a new methodology which continues to be under development. The methods used and the conclusions from the analysis may be subject to further review and refinement.
Commenting on the information presented in the Frontier Series research paper, Edel Flannery, Senior Statistician in the Prices Division, said: “The increasing rate of inflation since the middle of 2021 has prompted greater interest in price change and its effects on households. The CPI is a measure of average inflation for all households. However, each household has its own unique consumption pattern of goods and services and therefore its own personal experience of inflation. The research paper published by the CSO today attempts to take account of those differences between households and provides an estimated breakdown of the CPI results by household characteristics up to March 2022, calculated by combining the CPI results with more detailed expenditure data from the 2015/16 Household Budget Survey.
The report presents estimates of inflation classified by household income, composition of the household, housing tenure, age of the household reference person and whether the household is in an urban or rural setting.
Commenting on the results for estimated inflation presented in the research paper, Edel Flannery continued: “The official measure of inflation as published in the Consumer Price Index (CPI) shows that prices for consumer goods and services increased by 6.7% in the year to March 2022. Over the same period, the estimated annual inflation by household income categories showed a range from 6.1% for the top 10% of households by income, to 7.5% for the lowest 10% of households by income.
In the 12 months to March 2022, household groups which were estimated to have experienced inflation at a higher rate than the official measure of inflation of 6.7% included: Lower income households, with estimated rates of inflation of up to 7.6%; Households that rent their home from a local authority (7.3%); Households renting privately (7.0%); Households where the dwelling is owned outright (7.0%); and Rural households (7.3%).”
Commenting further on contributions to inflation, Edel Flannery added: “The cost of energy was one of the major drivers of inflation in the 12 months to March 2022. Transport related price changes were responsible for more than a third of the 6.7% annual change in the CPI (2.4 percentage points of the 6.7% increase) while Electricity, Gas & Other Fuels contributed more than another quarter of the change (1.9 percentage points).”
Some of the key highlights from the research paper show that:
Further commenting on results presented in the research paper, Edel Flannery continued: “Price changes for the different household groups for the 63 months from December 2016 (the base month of the CPI series) to March 2022 were also published today. Over that period, overall inflation as measured by the CPI was 9.6%. The lowest income decile experienced an estimated price increase of 11.4% over those 63 months; the highest income decile had an estimated increase of 8.8%.
Rural households experienced lower estimated inflation than the CPI over the 63 months from December 2016 to March 2022 (9.2% versus 9.6%). However, inflation estimated for rural households was higher than the CPI in the final 12 months, March 2021 to March 2022 (7.3% versus 6.7%).
In the 63 months since December 2016, the estimated inflation experienced by households with the reference person aged 65 or over was very close to the overall CPI (9.6%). In the 12 months to March 2022, these households had higher estimated inflation than the CPI (7.2% versus 6.7%).
Households with the household reference person aged under 35 had higher estimated inflation than the average CPI since December 2016 (11.1% versus 9.6%) but had slightly lower estimated inflation than the CPI since March 2021 (6.6% versus 6.7%).”
The research paper published today is one of the CSO Frontier Series outputs which highlights to users that care must be taken when interpreting the statistics in this release.
The Consumer Price Index (CPI) is designed to measure the annual rate of inflation, i.e., the change in the average level of prices paid by households for consumer goods and services. The index follows established international practice for consumer price indices. The CPI measures the change in the level of prices paid by households for a fixed basket of goods and services. Price indices for each CPI item are calculated and then weighted together by the proportion of total consumer expenditure that is spent on each, to give the total Consumer Price Index.
The fixed basket of goods and services measured in the CPI is comprehensively updated every five years based on the CSO’s Household Budget Survey (HBS). The HBS provides a detailed profile of household expenditure, item by item. Following each HBS, the CSO reviews the basket of goods and services included in the CPI. The HBS is also used, together with other data, to establish the weights (i.e., the share of total consumer spending represented by each item) used in calculating the index and these weights are updated annually. The expenditure weights used in calculating the CPI represent expenditure on consumer goods and services by Private Households, Visitors to Ireland, and Institutional Households. The most recent HBS, measuring expenditure by private households, was in 2015/16.
The CPI is a measure of average inflation, based on average expenditure weights.
However, every household has its own unique consumption pattern and therefore its own personal experience of inflation. Households that spend a higher proportion of their total expenditure on goods and services that are increasing in price by more than the rate of inflation, will experience higher inflation than the CPI average rate. While it would not be feasible to calculate a CPI for each individual household, recent work both nationally and internationally has highlighted the value of compiling inflation estimates for different groups or cohorts of the population.
Price increases have remained relatively stable for the last number of years, and until 2021, the CPI had not increased by more than 2% since 2011 (+2.6%). While prices decreased through much of 2020, inflation has been increasing since April 2021. In July 2021, annual inflation was 2.2% and the rate of inflation continued to rise for the rest of the year, reaching 5.5% in December.
In 2022 so far, the annual rate of inflation has been 5.0% in January, 5.6% in February and 6.7% in March 2022. The latest CPI figure is 7.0% for the year to April 2022.
The EU harmonised HICP index flash estimate for Ireland in May 2022, published on 31 May 2022, was 8.2%. The HICP is a different measure than the CPI but there are large overlaps in the items covered and the general methodology of each index. The increasing rate of inflation since the middle of 2021 has prompted greater interest in price change and its effect on households. A paper by the Central Bank of Ireland in February 2022 addressed the topic of Household characteristics, Irish Inflation and the cost of living.
The research paper published today undertakes a similar analysis at a more detailed level. It provides an estimated breakdown of the CPI results by household characteristics up to March 2022, calculated by combining the CPI results with more detailed expenditure data from the 2015/16 HBS. The research paper looks at the period from December 2016 to March 2022. The household groups analysed include households grouped by equivalised gross household income deciles, by household tenure, by the location of the household (urban/rural), by the age of the household reference person, and by the composition of the household.
See also: Information Note - The Consumer Price Index (CPI) Explained
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