What is the difference between percentage increase and inflation?

Percentage increase is a general mathematical calculation measuring the growth of any single value over time. Inflation is a specific economic concept measuring the sustained increase in the general price level of goods and services in an economy. While inflation is calculated using the percentage increase formula on price indices (like CPI), not all percentage increases are inflation.

Formula

Context is key.

• Percentage Increase: Measures growth of one specific item (e.g., my salary grew 10%).
• Inflation: Measures average growth of a basket of items (e.g., the cost of living grew 3%).

Worked Example

• Your rent goes from $1,000 to $1,100. That is a 10% percentage increase.
• The national CPI goes from 100 to 103. That is 3% inflation.
• Your rent increase (10%) was higher than the inflation rate (3%).

Result: You experienced a price hike higher than the general inflation rate.