These indices were first produced in 1948 and are revised each year to provide an indication of the change in price from year to year of the sorts of things that most of us buy on a regular basis. Both indices feed into the Bank of England’s decision each month as to whether interest rates should go up or down and many employers base their pay increases on one or other of these figures.
Regular items include pasta, cigarettes, electricity, wallpaper, fridges, washing powder, school fees and car insurance, but this year sees the first introduction of mobile phone app’s, MDF (board commonly used for DIY projects), sparkling wine and dating agency fees. At the same time, a four-pack of lager, rosebushes and “women’s high-heeled sensible shoes” have been removed. These changes reflect changes in spending patterns amongst shoppers in the UK as determined by the statisticians at the ONS.
The index itself is created using a formula that weights the cost of around 650 separate items from various suppliers around the country. This formula helps avoid biases caused by short term fluctuations. For example, more money is spent on swimwear in the Summer and less is spent on domestic gas. Around 180,000 separate price quotations are used to produce the figures each month. That’s a lot of data to sort through!
- A brief guide to the Consumer Price Index (statistics.gov.uk)
- Smartphone ‘apps’ added to official inflation basket (telegraph.co.uk)
- Apps go into the inflation basket (independent.co.uk)
- Smartphone and app prices to help calculate UK inflation rates (thenextweb.com)
- Prosecco pushes lager off national shopping list used to calculate inflation (dailymail.co.uk)
- Smartphones join inflation basket (bbc.co.uk)
- Apps and dating agency fees in new inflation basket (telegraph.co.uk)
- APPY SHOPPER Phones join ‘inflation basket’ (thesun.co.uk)
- Smartphone rings the changes in official price basket (independent.co.uk)