| Data storage joins inflation basket |
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| Monday, 17 March 2008 | |
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Changes have been announced to the ‘basket of goods’ used to calculate the Retail Price Index.
Other notable changes to the basket include the removal of Top 40 CD singles, which have been dropped as popularity of music downloads has led to a decrease in spending on this item. Audio CDs remain represented in the basket by chart CD albums and a new item for non-chart “classic” albums by artists such as U2, Pink Floyd and Madonna. CPI and RPI The Office for National Statistics (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 some 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 the 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, steering lock devices have been removed this year as spending has decreased in line with improved “onboard” security of newer cars such as automatic steering wheel locks. Changes in food consumption patterns 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 (275-330ml) are already in the basket, the inclusion of crates (20 bottles) reflects changing tastes and consumer spending patterns. Other changes in food consumption patterns also feature in the new basket, with small varieties of oranges and peppers included. Out of the basket go frozen vegetarian ready meals, to allow improved coverage of fresh vegetables. USB storage sticks Among consumer technology items, 35mm camera film is removed. This follows the removal of the 35mm camera last year, and reflects the fact that spending on camera films has declined as digital cameras become more popular. Camera film has been replaced by portable digital storage media where spending has grown steadily in recent years. Digital storage also incorporates a wide range of gadgets such as memory cards and USB storage sticks, which are used with game consoles, mp3 players, mobile phones and computers. TV repairs are removed from the basket this year because spending has been decreasing for a number of years as television prices fall and technology and reliability improves. Improve sector coverage People also increasingly replace broken televisions rather than fix them, especially with the current dominance of flat panel screens. Also out of the basket are microwave ovens, which first entered the basket in the 1980s. Spending on microwave ovens has decreased in the past decade due to the fact they are so cheap to buy. Washable carpets are also dropped from the basket. 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. ONS also keeps under review the places where goods and services are bought, to ensure coverage across a range of outlets. Related articles
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