Estimated Inflation by Household Characteristics September 2022

This report updates the CSO’s research papers on Estimated Inflation by Household Characteristics March 2022 and Estimated Inflation by Household Characteristics June 2022 to include estimates for the latest available three months of July, August and September 2022. The estimates of inflation for different categories of household are presented for two time frames: the five years from September 2017 to September 2022, and the twelve months from September 2021 to September 2022.

Background

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 relative importance of each item as a share of total consumer spending) 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. An update to the HBS was delayed in 2020 due to the COVID-19 pandemic. Collection of data for the HBS started in July 2022 and will continue for at least 12 months. The HBS data will then need to be analysed before being used to update the basket of goods and services for the CPI.

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, research in Ireland and other countries has highlighted the value of compiling inflation estimates for different groups or cohorts of the population.

Price increases had remained relatively stable for the last number of years, with annual changes in the CPI remaining under +2.0% between September 2012 and June 2021 inclusive. While prices decreased on an annual basis 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, exceeding 5% in each of the final three months of 2021.

In 2022 so far, the annual rate of inflation has been 5.0% in January, 5.6% in February, 6.7% in March, 7.0% in April, 7.8% in May, 9.1% in both June and July, 8.7% in August, 8.2% in September, and 9.2% in October.

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.

This report undertakes a similar analysis at a more detailed level. It updates the CSO’s earlier reports on this topic and now provides estimates up to September 2022. The estimated breakdowns of the CPI results by household characteristics from September 2017 up to September 2022 are calculated by combining the CPI results with more detailed expenditure data from the 2015/16 HBS. 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 

Recent trends in the Consumer Price Index (CPI)

In the tables and commentary, the following periods are distinguished:

• Overall period (five years) from September 2017 to September 2022;
• The period (four years) from September 2017 to September 2021;
• The 12 months (one year) from September 2021 to September 2022.

In the five years from September 2017 to September 2022, the CPI increased by 12.9%, most of this increase being concentrated in the final 12 months.  Between September 2017 and September 2021 (four years), the CPI increased by 4.4%; and in the 12 months from September 2021 to September 2022, the CPI increased by 8.2%. See Table 1.1.

Further details for selected CPI subindices are shown in Table 1.1.

For Electricity, Gas & Other Fuels, prices increased by 23.7% in the four years between September 2017 to September 2021, followed by an increase of 49.6% in the year from September 2021 to September 2022. This means that prices for Electricity, Gas & other Fuels in September 2022 were 85.1% higher than five years earlier.

The Transport subindex saw an increase of 9.4% in the four years from September 2017 to September 2021, followed by an increase of 11.3% in the year to September 2022. The Transport subindex rose by 21.7% in the five years to September 2022.

The index for Rent increased by 15.8% in the four years from September 2017 to September 2021, and by 10.0% in the year from September 2021 to September 2022. The Rent index was 27.5% higher in September 2022 than five years earlier.

Looking at these CPI results, we can expect that household groups which spend higher than average proportions of their total expenditure on Electricity, Gas & Other Fuels and on Transport to have experienced higher inflation than the overall CPI particularly in the last 12 months. The Rent subindex between September 2017 and September 2021 would suggest that households which spend a higher than average proportion of their total expenditure on rents were experiencing higher than average inflation over that period. The results analysing these points are presented in the third chapter (Estimated Inflation by Household Characteristics)

Household Budget Survey (HBS)

The Household Budget Survey (HBS) provides the detailed item by item profile of expenditure used in establishing the basket of goods and services measured by the CPI. The results of the HBS can be broken down to show the spending patterns of different types of household.

Results from the 2015/16 HBS on how households’ pattern of spending on goods and services differs depending on household characteristics, as shown in Table 1.2, tell us that:

The proportion of spending on Rent is higher among:

• Households with lower gross household income
• Households that rent privately in comparison to households that rent from a local authority
• Urban households
• Households where the reference person is aged under 35 years
• Households of one adult with children

The proportion of spending on Electricity, Gas & Other Fuels is higher among:

• Households with lower gross household income
• Households that either own their home outright or rent from a local authority
• Rural households
• Households where the reference person is aged 65 or over
• Households of one adult or one adult with children

The proportion of spending on Transport is higher among:

• Households with higher gross household income
• Households that own their home (outright or with a mortgage)
• Rural households
• Households where the reference person is aged 35 to 64 or aged 65 or over
• Households of two or more adults