UK inflation measures to be powered by car and rail fare data

Passengers walk around the concourse at Waterloo Station in London. UK inflation currently stands at 7%
The ONS plans to use data from Auto Trader on second-hand car prices and information from the Rail Delivery Group on rail ticket sales to measure UK inflation: Reuters/Peter Nicholls (Peter Nicholls / reuters)

Big data on cars and rail fares is set to be used to measure UK inflation in a bid to give a more detailed picture of how prices are changing and who they are affecting.

According to the Office for National Statistics (ONS), plans to use data from Auto Trader on second-hand car prices and information from the Rail Delivery Group on rail ticket sales.

“These data will increase the number of monthly price points we use on second-hand cars from around 35 popular car models at three different ages to around 400,000 car listing prices, and the number of rail fare price points to 30 million from an aggregated single annual estimate produced by the Office of Rail and Road,” the ONS said on Wednesday.

It will publish experimental estimates using these sources in June, and then bring them into headline inflation measures from 2023.

Read more: UK households face £271 rise in food bills

It comes as COVID-related supply chain issues, rising fuel costs, and shortages linked to the war in Ukraine have all combined to push the growth in prices to levels not seen since the early nineties.

Earlier this month, data revealed that UK inflation soared to a new 30-year high of 7% in the year to March, above the 6.7% predicted by economists, and up from 6.2% in February.

Rising energy bills and fuel costs were largely behind the rise.

“For many years the way we produced inflation figures was relatively straightforward,” Mike Hardie, head of inflation statistics at the ONS, said.

“Using a range of sources on household spending we carefully selected 700 items that represented typical household outgoings – from the cost of teabags to a holiday – and then using our team of price collectors, closely monitored these prices by checking if and by how much the price and size and quality changed across over 140 locations and online each month.”

Read more: Household bills rise for 9 out of 10 UK adults, ONS survey finds

Although this provides an overall picture of how prices are changing across the UK, Hardie highlighted that it does not allow insight into how prices are changing in different parts of the country, for people of different incomes, or to what extent people switch brands when the price of one particular item shifts.

Last year, the ONS announced plans to take data directly from supermarket tills, providing information on exactly how much of each item was being bought and where. This also allows the ONS to know how spending habits are changing.

It will release initial estimates using this information in June 2023, bringing this data into headline inflation numbers in just under two years from now.

It comes as UK pay rises lag six percentage points behind retail price index (RPI) which is at 9%.

The gap between inflation, as expressed by the RPI, and pay awards is at a record high with the biggest gap seen since XpertHR’s records began in April 1984.

Watch: How does inflation affect interest rates?