The short answer is….it depends which measure of inflation you use, writes Mike Dimond of the British Furniture Manufacturers (BFM) association.

The Consumer Price Index (CPI) for April 2015 shows that ‘furniture & furnishings’ prices fell over the year by 0.2 per cent.

Unfortunately, the CPI does not look at furniture alone. However, the Retail Price Index (RPI) does, and it presents a different picture entirely.

It looks separately at furniture and furnishings prices. The RPI shows that in the year to April, the retail price of furniture rose by 2.5 per cent, though furnishings were down by 0.8 per cent.

Therefore, how can we have a situation which shows a negative trend in prices with the CPI compared to a positive one with the RPI? This variation in price is even more surprising when you look at the ‘basket of goods’ that the CPI and the RPI use to track price changes.

The CPI category for ‘furniture and furnishings’ is made up of exactly the same basket of products as the category ‘furniture’ in the RPI, apart from the CPI’s inclusion of wall hanging mirrors which is absent from the RPI (and this was confirmed directly with the Office for National Statistics). The basket covers various products in the dining room, bedroom, living room, kitchen, home office and garden. Both indices also use the same gathered data on which to base its calculations.

The answer it seems lies largely in the different averaging formulae used.  And, here is also where a controversy lies. In general terms, the RPI is an arithmetic mean – that is, the prices of items included in it are simply added up and divided by the number of items.   

Unlike the RPI, the CPI takes the geometric mean of prices to aggregate items at the lowest levels. (A geometric mean is calculated by multiplying the prices of all the items together and then taking the nth root of them, where ‘n’ is the number of items involved).

The “formula effect” tends to produce a difference of approximately 1 per cent between the CPI and the RPI indices as a whole, but the variations in movements of individual items within the ‘basket’ of goods can be much more, particularly where there are large variations in prices within particular product items.

The CPI was adopted relatively recently as the official measure of inflation but is not without its critics and nor is the RPI (which has been in existence for decades).

The ultimate question therefore is which inflation measure is best to judge furniture retail price movements?  The answer basically boils down to which averaging formula you prefer!

bfmLogoMike Dimond is Director of Employment & Membership Affairs at BFM.