Group-Specific Inflation Rates for Austrian Households

The consumer price index commonly computed by national statistical agencies can be interpreted as a weighted average of price indices for individual households, with the weights proportional to the total consumption expenditure of each household. In other words, the aggregate consumer price index is usually not a perfect indicator of the inflation experience of individual households. The extent to which household-specific inflation rates diverge from headline inflation generally depends on three things: 1) the divergence of consumption patterns across consumer units; 2) the divergence of expenditure budgets across households; and 3) the divergence of price developments across expenditure items. To estimate the divergence of group-specific consumer price indices across Austrian households, we construct group-specific inflation rates for the period from 2000 to October 2008 and evaluate consumption patterns across household groups. Households were grouped using a mix of two characteristics: a) household composition (i.e. male/female singles; two adults; three or more adults; lone parents; three or more persons, including children); b) low, medium or high household income. The study finds households with lower total spending to have experienced a higher inflation rate than the “average” consumer in the period under review. The average gap was about –0.1 percentage points annually. Second, the inflation contribution of housing and food (including nonalcoholic beverages) was higher for lower-income groups. Third, higher-income households usually have a higher inflation share of transport than lower-income households. Fourth, households with children and larger households do not necessarily suffer above-average inflation.