Consumer Price Inflation Basket Of Goods And Services: 2024
11th March 2024
The "shopping baskets" of items used in compiling the various measures of consumer price inflation are reviewed annually. The items in the baskets change so that the measures are up to date and representative of consumer spending patterns.
In 2024, 16 items have been added to the basket for the Consumer Prices Index including owner occupiers' housing costs (CPIH) and 15 items have been removed out of a total of 744 items.
The same changes have been made to the Consumer Prices Index (CPI) and Retail Prices Index (RPI) baskets.
Additions include air fryers, vinyl music, gluten free bread, and edible sunflower seeds.
Removals include hand hygiene gel, hot rotisserie cooked chicken, and bakeware.
The shopping basket
Consumer price inflation is the rate at which the prices of goods and services bought by households rise or fall. Imagine a large "shopping basket" containing those goods and services. As the prices of the various items change over time, so does the total cost of the basket. Movements in consumer price indices represent this change.
Within each calendar year, the basket contents are fixed so that changes in the indices from month to month reflect only changes in prices, and not variations in the quality and quantity of items purchased.
However, the contents of the basket and associated expenditure weights are updated annually. This is important in helping to avoid potential biases that might otherwise develop, for example, because of the development of entirely new goods and services. These procedures also help ensure that the indices reflect longer-term trends in consumer spending.
Changes to the items and associated weights are introduced in the February index each year, but prices are collected for both old and new items in January. This means that the figures for each year can be "chain linked" to form a long-run price index spanning many years. In other words, price changes between December and January are based on the old basket, while price changes between January and subsequent months are based on the new basket.
There are slightly different baskets for the Consumer Prices Index including owner occupiers' housing costs (CPIH), Consumer Prices Index (CPI) and Retail Prices Index (RPI), but the vast majority of items are the same in all three.
Representative items
There are some individual goods and services where spending is so large that they merit inclusion in the baskets in their own right, such as petrol. More commonly, a sample of specific goods and services must be selected that gives a reliable measure of price movements for a range of similar items.
Several factors are considered when choosing representative items, including:
ease of finding and pricing the product
availability throughout the year
amount spent on a particular item or group of items
variability of prices within a class
an analysis of the balance across the basket
Additions
Several new items have been introduced to represent specific markets where consumer spending is significant or growing and existing items may not adequately represent price changes. For example, gluten free bread has been added to reflect the increasing shelf space and range of gluten free products. Bread is thought to give the best coverage as a representative item because of its popularity among consumers. Air fryers are another addition, with consumers reportedly drawn to the energy-saving features as well as health benefits compared with conventional fryers. Spend on cooking items such as air fryers reportedly increased by over 30% between 2021 and 2022.
Edible seeds have not previously been represented in the baskets, but sunflower and pumpkin seeds have been added this year, reflecting their growing popularity. They are often seen as a healthy snack by consumers.
Some new items have been introduced to diversify the range of products collected for already established groupings. For example, rice cakes have been introduced to expand the representation of cereals, with research suggesting growing popularity as part of a healthier lifestyle. Similarly, spray oil has been added based on its shelf space and widened range, with some supermarkets releasing their own products.
Analysis of the broad balance of representative items across the Consumer Prices Index including owner occupiers' housing costs (CPIH) highlighted a need to improve coverage across a range of categories, including recording media, and games, toys, and hobbies. Vinyl records have been added back into the basket for the first time in over thirty years, reflecting a resurgence in popularity. Also, a card game has been introduced to the baskets to help spread the weight of existing games and expand the range represented.
In other cases, new items are direct replacements for the same or similar products. For example, we are adding two new data storage devices: an SD card and USB stick. These replace the current portable digital storage device item. Splitting this item increases the number of price quotes collected and again improves our coverage of the recording media part of the baskets.
These direct replacements can also reflect improvements in our data and methodology. There were previously two second-hand car items in the baskets, for two-year-old and three-year-old cars, but these have been replaced by two new series for petrol and diesel second-hand cars. The new series have increased product coverage in terms of the number of price quotes used and the wider age range of vehicles, so improving the representativity of our second-hand cars index and supporting analysis using more granular data. They are also based on daily delivered, web scraped data from Auto Trader as opposed to price collection once each month and, therefore, should be more responsive to fluctuating economic activity. Our Research and developments in the transformation of UK consumer price statistics article describes the change.
A final type of addition is where price collection difficulties suggest a change would improve the coverage and quality of price series in specific areas of the baskets. This year, a home-killed pork chop or steak item replaces the existing home-killed pork chop with bone. It is hoped that widening the description will improve coverage by increasing the number of price quotes that can be collected.
In addition to reviewing the specific items, the annual update considers the types of shops or places where prices are collected. While a pre-packed salad was already in the baskets, prices were previously only collected in supermarkets. However, there is now wider availability and they can be priced in other outlets selling vegetables.
We also considered adding electric car charging at public sites to the basket but decided against for this year. We will continue to monitor it with a view to introducing it in future.
Removals
It is important that growth in the overall size of the baskets is limited each year so that production costs and processing times are contained. Therefore, several items have been removed in 2024.
In some cases, this reflects low or decreasing expenditure and falls in stock levels for pricing. For example, hand hygiene gel has seen a reduction in shelf space since the height of the coronavirus (COVID-19) pandemic.
Elsewhere, analysis suggested that there was scope to remove items from certain groupings without any significant loss of precision in estimates of overall price change. For example, draught stout has been removed from an over-represented area of the baskets. Analysis has shown that price movements are similar to draught bitter, so dropping this item should have little impact. For the same reason, bakeware (for example, a baking tray or roasting tin) has been removed, with price movements following a similar trend to prices of frying pans, which remain in the basket.
Take-away tea and take-away coffee were previously two separate items but have been merged into one take-away hot drink. Again, this aims to rebalance the baskets, reduce coverage in some areas, and free up resources to improve it in others.
Ham was also previously represented by two items where prices moved in broadly the same way. Loose cooked ham has been removed but ham will continue to be represented by a pre-packed sliced ham item.
Finally, collection issues can influence changes and, as such, a hot rotisserie cooked chicken has been dropped as some supermarkets have stopped selling this item.
Rents and owner occupiers' housing costs
As part of our transformation of consumer price statistics, improvements to the series for private rents and owner occupiers' housing costs are being introduced with the February 2024 dataset released on 20 March 2024. The improvements come from two changes to the methodology. These are the use of all available administrative data in producing the figures for the latest month and the stratification of data at a lower geographical level in the Price Index of Private Rents, the source of the data used in the consumer price inflation figures.
Read he full article at ONS
