Visit a supermarket in 2025 and you'll see that a tub of Lurpak butter can cost £5.70. It may strike you that this represents a staggering increase from £3.65 just three years ago , so instead of paying the premium, you reach for the supermarket's own brand at £3.80.
Author
- Marcel Lukas
Senior Lecturer in Banking and Finance and Director of Executive Education, University of St Andrews
This kind of switch, multiplied across millions of shopping baskets, represents a massive shift in consumer behaviour that has been largely invisible to official statistics. But that's changing, as the UK embarks on its biggest revolution in measuring living costs since the second world war .
The Office for National Statistics (ONS) is transforming the way it tracks inflation, moving from painstakingly checking prices to analysing millions of real purchases through supermarket scanners. Consider olive oil, the price of which surged by 47% in a year , or milk, which jumped by more than 25% . While official statistics captured these price rises, they couldn't track how households adapted - whether by switching to cheaper alternatives, buying less, or cutting back elsewhere. This was a blind spot in our understanding of consumer behaviour.
Currently, price collectors visit stores across the country each month, checking the prices of about 25,000 products . It's like taking a snapshot of what's on the shelves at a particular moment. But this system, designed decades ago, often misses the real impact of inflation on different household types in things like choosing different products or switching stores.
This is crucial for understanding the real impact of inflation on lower-income households. These families often have less flexibility in their budgets and must make more dramatic changes to their shopping habits when prices rise. During recent periods of high inflation, many on low incomes found that official figures didn't match their experience, which was of even higher inflation than the headline rates. And there's a good reason why.
Inflation statistics aren't just academic exercises. They drive decisions that affect every aspect of our financial lives. The Bank of England uses them to set interest rates , which in turn influence mortgage payments and savings returns. Employers use them in wage negotiations. Government uses them to adjust benefits, state pensions and tax thresholds. Even commercial contracts, including mobile phone bills and rail fares, are often linked to inflation rates.
When these numbers don't accurately reflect price pressures, it can have serious consequences. If official figures underestimate the inflation experienced by lower-income households, benefit increases might not keep pace with their actual cost increases. Similarly, if wages don't rise in line with real living costs, workers effectively experience a pay cut.
The scanner data revolution
The ONS's new approach, to be introduced next year, will analyse around 300 million price points from supermarket scanners, covering about half of all grocery transactions in the UK. Instead of just seeing what's on the shelf, they'll know exactly what prices people are paying at checkouts across the country.
This massive increase in data points - from 25,000 to 300 million - will allow for a more nuanced understanding of consumer behaviour.
The change will also enable quicker identification of emerging price trends. After the start of the COVID pandemic and the Ukraine war, prices of certain goods changed rapidly. Scanner data could help spot these changes faster, allowing for more timely policy responses. It might also reveal regional variations in price pressures.
Take the 2023 surge in food prices - while overall food inflation hit 19% , the impact varied dramatically across households. Current statistics would not capture lower-income families switching from fresh to frozen vegetables, or from branded to value ranges.
With scanner data, policymakers could spot these trends quickly and respond more precisely - perhaps by adjusting benefit payments or targeting support to specific households when essential food costs spike. Instead of waiting for quarterly surveys to reveal hardship, they will be able to see in real time how different groups are coping with price pressures.
The ONS recently said full implementation will come in 2026, a year later than planned. While it will have the technical capability ready by March 2025, it is opting for a year of parallel running to ensure accuracy. This approach reflects how crucial these statistics are for the economy.
It has already modernised other areas of price collection, including incorporating 40 million train fare data points and 300,000 used car prices. But grocery prices, being central to household budgets and varying significantly across different income groups, require extra attention.
The change is coming at a crucial time. Recent years have shown how rapidly economic conditions can change and how differently these changes can affect various segments of society. The pandemic, Brexit adjustments, and global supply chain disruptions have all contributed to price pressures.
For consumers, while the changes won't directly lower prices, they could lead to more appropriate responses from the Bank of England, government and employers. Most importantly, it could ensure that official inflation figures better reflect the reality of the weekly shop, particularly during times of economic stress.
The transformation of inflation statistics might seem like a technical detail, but its implications reach far beyond government offices and economic reports. It's about ensuring that the official measures of living costs better reflect the reality experienced by millions of households across the UK. In this challenging economic environment, that's something worth getting right.
Marcel Lukas receives funding from the British Academy. He is the Director of Executive Education at the University of St Andrews and Fellow of the ONS. The presented views are his own and do not represent the ONS.
