What becomes clear is that whilst headline inflation is low, there are vast differences between the inflation rates of the various items that make up this headline figure. For example, consumer goods fell last year by 2% while the price of consumer services increased by 2.4%.
Using the Office of National Statistics’ Consumer Pricing Index (CPI) data, NatWest economists have devised their own measure of motoring-related goods, services and expenditures - the Petrol Heads Index (PHI). This includes windscreen wiper blades, brake pads, car batteries, tyres, car bulbs, MoT fees, car repairs, motor insurance, fuel prices, new and second hand car prices, among other things. Some of these prices have been moving in opposite directions.
Overall, the PHI jumped by over 17% between 2009 and its peak in 2012 (with a 9% rise in 2010 alone). Soaring fuel costs were the primary reason, triggering a change in motoring behaviours. In England for example, the average annual mileage fell by 11% or 1,000 miles, from 8,900 in 2007 to 7,900 in both 2013 and 2014. With pay freezes and cuts widespread over this period, the rev counters of households’ budgets were in the red, with motorists applying the brakes to consumer spending.
The petrol heads index appears to have turned a corner onto an uphill slope. Declines in the PHI are likely to be seen only in the rear view mirror. With some warning lights flashing on the dashboard, looking ahead prices are more likely to rise than fall.