Estimating Regional Harmonized Indices of Consumer Prices: An Application to the UK

David Hearne

Review of Income and Wealth, 2025, vol. 71, issue 3

Abstract: This paper devises and implements a novel methodology to derive expenditure weights for regional (sub‐national) consumer price indices for the UK from 2010 to 2022. Whilst high‐quality expenditure data are available at the national level, this is not the case for subnational regions. As a result, regional expenditure weights have hitherto proved difficult to estimate in many countries, including the UK. By applying a Bayesian hierarchical regression model to survey data, this paper derives stable regional expenditure weights, which are combined with regional price quote data (where available) and national item indices, permitting regional inflation to be calculated in line with modern practice. The resulting evidence suggests that the recent period of high inflation had a significantly more severe impact on northern regions than on others, and that these effects are predominantly driven by differences in expenditure weights. The results also suggest a particularly important role for actual rentals for housing.

Date: 2025
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