Inflation: Who is hardest hit?

Balloons Inflation is one of the key UK economic measures
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UK Economy

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Inflation - or the rising cost of goods and services - is one of the key measures that affects our financial well-being.

And it is now undermining the living standards of most people in the UK.

For most of the past four years, apart from a spell of falling prices in 2009, inflation - as measured by the Retail Prices Index (RPI) - has usually been above an annual rate of 4%.

From January 2007 to January 2011, the RPI went up by 15%, according to the Office for National Statistics (ONS).

Wages though, as measured by average weekly earnings, rose by just 7.6% - almost exactly half the rate of inflation.

So, on average, the earning power of people in work fell by 7.4% in that time, the ONS said.
What is inflation?

Inflation is the rate of change in the level of prices for goods and services, which affects the purchasing power of money.

It is measured by the ONS, which charts the prices of hundreds of goods and services - from basic items such as bread to new products.

On the government's preferred measure of inflation, the Consumer Prices Index (CPI), inflation stood at an annual rate of 4.5% in August.

But as with many economic measures, the headline figures do not always tell us the whole story.

So, with prices rising, who is being hit the hardest?

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