You will likely have heard of the successes of influencers David Attenborough and Marcus Rashford over the last few years in holding Governments to account and achieving material change in policy for their environmental and school meal campaigning respectively.

You might not have noticed that of the “bootstrap cook” Jack Monroe last week.  

Jack had been doing some analysis of recent inflation figures to see how accurately they measure the change in prices of the goods being bought by people of different backgrounds, in particular the poorest.  It’s not surprising this is an area of focus, with inflation riding at its highest rate for decades.

Jack found that the current RPI measure was a really poor indicator of the effects of rising prices on the poorest as the ‘basket of goods’ they regularly buy bore such little resemblance to the Office for National Statistics traditional RPI measure of c180,000 items.  It seems ‘everyday items’ have been increasing in price at a far higher rate than that which would be indicated by RPI.  

Jack’s successful campaigning looks set to prompt the ONS to have a really good look at how inflation measures are best constructed in the future.  There is some suggestion that there may be a release of indices aimed at different elements of the population perhaps by showing the effect on specific groups classified by income.

Bdb’s clients will know that in our investment reporting we chart portfolio returns versus inflation linked expectations.  This is far more informative than more traditional benchmarking versus the major stock market indices (FTSE 100 etc. although we do this too).  After all, what’s most important is the ability your portfolio has to support your lifestyle needs in the future and inflation is the biggest risk to your financial plan in this regard.

If you didn’t catch it, Sam here wrote a great little piece about the inflation busting power of having equities in your portfolio recently.

We continue to monitor this situation and the response of the ONS.  We would welcome the release of more specific measures which would apply more suitably to our clients. The hope is that it will enable us to refine our reporting and the way we measure and think about inflation risk for our clients.  

It seems like we might be seeing the end of the one size fits all approach to measuring inflation. As we experience first hand the high levels of RPI prevalent right now, it is worth considering, what would the index look like for the basket of goods which you buy? and does your portfolio have the expected return required to tackle it?

We are looking forward to tackling the challenge of inflation in our planning conversations in the coming months.

Posted by: Matthew Kiddle | Posted in: News