Examining The Behaviour Of Individual UK Consumer Prices


  •  Corresponding author: Philip Bunn, Bank of England, Threadneedle Street, London EC2R 8AH, UK. Email: philip.bunn@bankofengland.co.uk.

  • The views expressed in this article are those of the authors, and not necessarily those of the Bank of England, the University of Birmingham or the BVCA. We thank the Office for National Statistics (ONS) for making the data available to us. We are also grateful to Neal Hatch, Steve Millard, Nick Oulton seminar participants at the Bank of England an anonymous referee for the Bank of England working paper series, two anonymous referees for this Feature and Steve Machin for useful comments. This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen’s Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.


This article examines how UK consumer prices behave, using two databases with millions of price observations: the microdata that underpin official Consumer Prices Index data and a database of supermarket prices. Prices do not change continuously but our key finding is the marked heterogeneity in the data. That is not consistent with standard microeconomic foundations that typically form the basis of macroeconomic policy models. Declining hazard functions and the distribution of price changes also argue against representative agent models. Our results suggest further work is needed to find a model of price-setting that genuinely corresponds to how individual UK consumer prices behave.