The Office for National Statistics (ONS) has proposed a new version of the Consumer Prices Index (CPI) which would include housing costs.
This new price inflation measure would be called CPIH and is designed to reflect some of the costs associated with being a home owner.
It is estimated that the cost of owning property typically makes up 10% of average expenditure. The new CPIH measure of price inflation would therefore more accurately reflect typical spending patterns.
Assuming the consultation is accepted, this new measure of inflation could be introduced as early as February 2013.
It would then be published along with the Retail Prices Index (RPI) and Consumer Prices Index (CPI) measures of price inflation. CPI has been the preferred measure of inflation used by the government since 2003.
Whilst potentially a more accurate measure of price inflation, CPIH would still only be providing an average indication of price changes.
Our experiences of price inflation are always individual, based on the precise nature of expenditure on different goods and services.
Understanding personal price inflation is an important part of Financial Planning, as the rising cost of living can have a big impact on our plans for the future, particularly in retirement.
Photo credit: Flickr/TinyApartmentCrafts
