Inflation - How the CSO measures it

The CPI is Ireland’s official measure of inflation, and it tracks the overall year-on-year rate of change in the prices of goods and services that people typically buy.

As a key economic indicator, inflation - as measured through the CPI - is one of the main ways of tracking how the economy is doing. It helps government and policy makers make financial decisions and is useful when the government is deciding on changes to taxes or social welfare payments. It is also widely used in industrial relations for wage negotiations and measuring if a person’s income is in line with the rate of inflation.

In general, people can use it in their day-to-day lives for assessing household budgets and the impact of price changes. The CSO has a Household Finances Calculator and CPI Inflation Calculator which many people find useful.

No, inflation as measured through the CPI tracks the change in the cost of goods and services. The cost-of-living is different, as it relates to the amount of money needed to sustain a certain standard of living by being able to afford expenses such as housing, food, taxes, and healthcare.

The CSO surveys thousands of homes and businesses every year and we use the information gathered from some of our surveys to produce a standard concept of what the average Irish household buys over the course of the year. This is known as the “basket of goods and services”.

We then track the price of more than 50,000 items every month, and by comparing the current price with the price of the same items in the same month of the previous year, we can calculate the annual rate of inflation figure.

Our Consumer Price Team collects monthly price data using a range of methods such as in-person visits to shops or through online searches. We also receive retail scanner data on a weekly basis, which is everything that goes through the tills from a selection of supermarkets.

From the data we have collected, we have the unique ability to track price changes and the rate of inflation over the course of many years – all the way back to 1922, when the series began. This allows us to see trends over time, particularly in people’s buying habits as the items in our basket typically change every five years.

We survey service providers by post, by email, and by phone in order to get prices from them. This research is also complemented by other data sources, for example by tracking prices online. We then collate additional information to make sure that the importance of each item is reflected by how many people are using a product. For example, for broadband internet, you might have one service provider with 50% of the market share. Any price changes they make are more significant in terms of impacting inflation than a provider who has 1% of the market share, and the CPI needs to reflect that.

We have seen some service providers refer to the CPI when they announce price increases, however it is important to understand that the CSO compiles the CPI but does not set or decide the rate of inflation or decide on charges applied to consumers by any service provider.

The basket of goods and services is based on the information gathered from the Household Budget Survey where people tell us what they are spending money on. This gives us the chance to add new items that people are buying, and we can also remove items when they are not being purchased as much as before. The most recent update was in 2023, when items such as the landline telephone bill, nightclub entry, and Swiss rolls were removed. Newer tech items like smartwatches and air fryers were added as well as milk and meat substitutes, and gin.

People certainly feel things, particularly food items, are getting more expensive than the rate of inflation, and this feeling is not unfounded. If we look exclusively at food items, the rate of inflation over the past three years is 13.6%, which outstrips the overall inflation rate of 8.8% for the same period. As each household has its own unique buying patterns based on its characteristics such as the number of people living in the home, or if the home is rented or owned outright, it will have its own personal experience of inflation. This may differ from the CPI which is a measure of average inflation for all households in Ireland across not only goods, but services also.

Every item in the basket has a weight applied which reflects its importance to the overall household spend. For example, rent makes up almost 7% of the CPI basket, and so it has a much higher weighting than milk, which is less than 1%. This ensures that, for example, a 5% increase in the price of rent has more of an impact on the rate of inflation than a 5% increase in the price of a litre of milk. We review and update these weightings every year, based on national accounts data.

Some people think the CPI just covers grocery prices, and while they are very important, Food & Non-Alcoholic Beverages is the fourth largest weight after Restaurants & Accommodation, Transport, and Housing & Energy costs.

Yes, because while the CPI provides detailed information on changes in food costs, it is not just about food prices. People notice the price of food creeping up in the shops, because they are doing their food shopping once or twice a week and can really see a difference at the till. They may not notice that some larger expenses – maybe things that they only pay for once a year - might have actually come down in price.   

People remark that a pound of butter costs approximately €5 in the shop, and how expensive it is compared with just a couple of years ago. This is true, and if you are buying a pound of butter every week, that is an annual cost of €260. Compare that with a large purchase that may have come down in price, and if this has a greater weighting on the basket of goods, this can impact the measurement of inflation. For example, the price of Home Heating Oil has fallen by 1.2% in the 12 months to September 2025, but because this is something that people might purchase two or three times a year, we tend not to consider it when we are thinking about how inflation impacts our daily lives.

As we receive comprehensive scanner data directly from many of the supermarkets, we know both the total value of the products sold and the total volume of the products sold. This means we can work out the average unit price, so the CPI reflects what is paid by people who are getting the discount, but also people not getting the discount. This has become particularly important as we are beginning to see significant differences in prices with some retailers depending on whether a consumer uses a loyalty card or not. If we couldn’t determine average unit prices for those products, the index could potentially be skewed, depending on whether we recorded the discounted or non-discounted prices.

The CPI is calculated in line with international best practice, and we have regular visits with Eurostat which is the statistical office of the European Union. It is important to regularly examine our methodology and ensure it is in line with how inflation is calculated across the rest of Europe.

The Harmonised Index of Consumer Prices (HICP) is the official EU rate of inflation and there are some differences between how it is calculated, and how the CPI is calculated. For example, the HICP doesn't include household ownership costs such as mortgage interest, building materials, and things like that, whereas the CPI does. These differences are because the HICP needs to be comparable across the whole of the European Union.