Prices in interwar Britain

This article examines the reliability of current estimates of the behavior of retail prices in Britain during the interwar period. New cost of living indices are presented, for both working- and middle-class households, which, when considered in conjunction with Chapman's estimates of nominal incomes, are broadly in line with ameliorists views of trends in real wages and salaries. In the case of the working-class index, however, it is suggested that the official Ministry of Labour index somewhat overestimates the fall in prices during the depressions of 1920-1921 and 1929-1932; hence, real wage growth is similarly exaggerated. In the case of middle-class families, the new cost of living index is generally similar to Stone and Rowe's consumer expenditure deflator. The behavior of prices during the First World War and immediate post war boom is considered by re-weighting the five subindices used in the construction of the official series. In comparison with an index based on 1918 weights, it is argued that the official index overestimates wartime inflation by about 3%; although it does not appear that the adherence to repricing a 1914 basket of goods had any long-term impact on cost of living compensation during the 1920s