Measuring Inflation
Changes to CPI and RPI shopping baskets
Café culture and the increasingly dominant digital technology market have had an impact on the way we spend our money. Health-conscious consumers currently favour fruit smoothies, fresh groceries and small type oranges (for example, satsumas and clementines).
Fruit smoothies are included as the emerging market of healthy soft drinks continues to rise in supermarkets. Muffins are included for the first time to represent snacks such as croissants and cakes that people generally buy with a coffee in cafes around the UK.
Lager stubbies are not as popular as they were 10 years ago and although single bottles of regular sized lager are already in the basket, the inclusion of crates (20 bottles) reflects changing spending patterns.
The way we buy music has also changed, with consumers preferring to download individual tracks rather than purchase Top 40 CD singles, which are now completely removed from the basket. Audio CDs are still represented and a new item covering the nostalgic consumption of non-chart ‘classic’ albums by artists such as U2, Pink Floyd and Madonna has been introduced alongside the existing top 40 CD album.
Digital prominence is also obvious in the television repairs service, where prices on TVs have fallen and technological reliability improved. Consumers now prefer to replace worn TVs rather than repair them, which usually warrants a switch to HD-ready technology and flat-panel televisions.
This highlights a change visible across the board. Camera film has been altogether replaced by universal digital storage devices (such as USB sticks) which provide memory capacity for cameras, mp3 players, mobile phones and computers.
Digital cameras and related media have been included in the basket since 2004. This year, 35mm camera film has become as redundant as the 35mm camera that fell from the basket last year.
ONS collects about 120,000 prices every month for a 'basket' of about 650 goods and services. The change in the prices of those items is used to compile the two main measures of inflation: the Consumer Prices Index (CPI) and Retail Prices Index (RPI). The Bank of England uses the CPI as its inflation target while the RPI is used to calculate increases in pensions and other state benefits.
The contents of the basket are reviewed every year, and changes can be made for a number of reasons. Some items enter the basket because spending on them has reached a level that demands inclusion to ensure that the basket represents consumer spending. Some are included to improve coverage of particular categories with high variability in prices and some to diversify the range of products collected for already established items.
Similarly, items are dropped for a variety of reasons. For example, microwave ovens are still as popular as they were in the 1980s but due to decreasing prices and increasing reliability the amount spent on them has decreased.
Changes to the basket are often made to improve coverage of a sector where spending has increased. ONS tracks consumer spending, and uses survey results to ensure that items on which people spend most have the biggest share of the basket. Each is assigned a proportion, or 'weight' of the index. The 'weight' of each category in both the CPI and the RPI is adjusted every year to take account of these changes.
printer-friendly
Latest On Inflation