Developments in consumer prices do not treat citizens equally. The price expert calculated an example that shows that there can be virtually a clear difference in inflation between different households.
With inflation usually refers to a twelve-month percentage change in consumer prices. It is described in one convenient chapter. In December, for example, the average annual change in consumer prices, or inflation, was 3.5 per cent.
For the individual, however, the phenomenon is less clear.
Statistics Finland retired price expert Ilkka Lehtinen write in his recent blog post about how inflation is not the same for everyone in real life.
Indeed, inflation measures the price development experienced by the average household.
“The average household lives in a rental apartment and a owner-occupied apartment at the same time, drinks alcohol and smokes tobacco. The household drives its own car and is at the same time a public transport user. There is hardly any such average household, ”Lehtinen writes.
Leaflet gives an illustrative example of how inflation can hit the wallets of different households in very different ways.
For example, in a rural household living in an old electric or oil-heated detached house, driving a lot, consuming alcohol and tobacco on average, spending more money on food and rarely visiting a restaurant or cultural services, inflation is practically 4.8 per cent, according to Lehtinen.
Instead in an urban economy that lives on rent, does not own a car but uses public transport and bicycles, does not smoke tobacco, consumes cultural, restaurant and communication services more frequently and trades less in food, inflation can be only 1.5 per cent in practice.
“The big difference is mainly explained by four factors: energy, construction, rents and tobacco prices,” says Lehtinen.
For example the rural household spends a lot of money on things like gasoline, fuel oil and electricity. In addition, the detached house is constantly being repaired.
The urban economy, on the other hand, lives on rent and uses other goods and services whose prices have hardly risen during the year. According to Lehtinen, the decisive factor was the non-existent annual change in rents in December 2021.
Lehtinen points out that the future of consumer price developments cannot be inferred.
“However, it must be remembered that in a year’s time, the inflation in these households may look very different,” Lehtinen writes.
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