Adults in the UK think the inflation rate is on average more than three times its actual figure, and more than a third (34%) have never heard of the Consumer Price Index, which is used to calculate the cost of living from the prices of everyday groceries.
Research conducted by short term loan provider Wonga tested people on their knowledge of the cost of living, including whether they knew the prices of ten own-brand supermarket items monitored by the Consumer Price Index (CPI).
The CPI monitors the annual changes in the costs of various consumer items that might be found in a typical shopping basket, to determine the country’s inflation rate.
The Office for National Statistics’ official report on the UK’s inflation rate in March 2018 put it at a 12-month low of 2.5%. Wonga’s research showed that the 2,000 UK adults polled thought the rate of inflation was on average over three times the actual figure at 8.5%. The profession with the most people who correctly identified the inflation rate was lawyers (7%).
Two thirds (66%) of the 2,000 respondents had heard of the CPI, but knowledge varies significantly between professions. 56% of people working in retail hadn’t heard of it, which is more than any other profession. People who work in accounts were most familiar with it – 83% have heard of the CPI.
When it came to identifying the product prices of ten own-brand supermarket items monitored by the Consumer Price Index, marketers gave the most wayward average prices for five items, believing products were on average £2.60 more expensive than the actual cost of the item. Designers came second-bottom of price guessers, giving the worst average answers for three items. Perhaps surprisingly, people working in accounts were third-bottom, with the worst answers for two items.
The answer widest of the mark was for 130g of salmon fillets. Although they cost on average £2.04 in the ‘big four’ supermarkets of (Tesco, Asda, Sainsbury’s or Morrisons) accounts workers gave the average answer of £6.12 – triple the real price.
UK adults overestimated every product price, showing respondents expected items to cost more than they did:
- Frozen prawns (100g) – overestimated by 56%
- Fresh salmon fillets (130g) – overestimated by 56%
- Non-dairy milk drink, i.e. almond milk (1l) – overestimated by 49%
- Clear honey (454g) – overestimated by 46%
- Beef rump steak (244g) – overestimated by 40%
- Bag of mixed salad leaves – overestimated by 39%
- Large ready to eat avocado – overestimated by 38%
- Sweet potatoes (1kg) – overestimated by 33%
- Quiche – overestimated by 24%
- Punnet of raspberries (150g) – overestimated by 14%
James McMaster, Head of Marketing in the UK at Wonga, said: “It’s easy for us to lose track of the cost of individual items if we don’t particularly concentrate on them when we’re shopping, but it’s an important part of budgeting. Having a rough knowledge of the price of groceries also helps to plan your money throughout the month.
“That’s why we’ve created a tool so that people can test how familiar they are with these costs, and to show how much they could save on everyday items.”