Knowing the price

SIR – Tim Wallace (Business, August 6) draws attention to the issue of our trust in economic statistics.

An area of legitimate concern is the rationale for the way in which price statistics are produced and used. As the article states: “Accurate inflation data is crucial as household incomes are squeezed by rising prices”.

The Retail Prices Index was designed to be the main measure of inflation as experienced by households, but the Office for National Statistics believes that legislation now limits its scope to develop this index.

On the other hand, according to the UK Statistics Authority, both the Consumer Prices Index and the new Consumer Prices Index Housing are economic indicators of inflation, based on national accounting principles, and suitable for technical uses such as the deflation of consumption expenditure in the national accounts.

Earlier this year the National Statistician defined two broad classes of price index – one suitable for macroeconomic purposes and the other reflective of households’ experience of inflation. The ONS, guided by the National Statistician and assisted by Royal Statistical Society members, plans to produce a new index (currently called the Household Costs Index), which many hope will replace the RPI as the main measure of household inflation. This will be complementary to the CPIH but more relevant to the household experience of changing prices. Tony Cox

Chairman, RPI CPI User Group Ipswich, Suffolk