7IM’s Kumar on the inflation figures – a snapshot of a very specific basket

by | Jan 19, 2022

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Ben Kumar, Senior Investment Strategist at 7IM, comments:

“As the CPIH creeps ever higher to 4.8%, our expectation is that this will continue to settle at higher levels than the last decade, but not troublingly so. For savers, this will continue to challenge their portfolios and so we’d suggest looking to higher yielding areas than fixed income, such as alternatives, for protection.

“What investors and savers should remember about these figures though is that they represent a snapshot of a very specific basket of products and might not necessarily correlate to what many people will be spending their money on. For example, in the CPIH basket at the moment, ‘recreation and culture’ makes up 11% of spending.

“But dig a little deeper into the constituents: camper vans; boats; barbecues; football season tickets; games consoles; hamsters; the list goes on and on. You might have spent money on a few of these, but likely not all of them. Likewise school and university fees which make up 3% will be relevant to some households and not others. These figures are based on a basket of the average person’s spending – but none of us are the average person.


“For investors, the goal should be to ensure that savings at a minimum keep pace with inflation. But it’s worth taking the time to work out what that inflation level is for you as an individual – where do you sit on that scale and will protecting against the official rate be more than ample or perhaps not enough. Because, for now, the inflation number you see on the news will almost certainly not describe your personal experience of prices.”

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