Every year, the consumer goods basket or the ‘shopping basket’, a group of items that are used as reference points to measure price rise is reviewed in the UK.
The items included in the basket help measure the rate at which the prices of goods and services bought by a household rise or fall. In other words, inflation measures the “erosion of living standards”.
After this year’s review of the basket however, men’s suits and individual donuts were removed from it. Some of the changes made to this basket are a result of changes in the way people are living because of the pandemic.
According to a BBC report, a typical household in the UK could see its income fall by over 1,000 pounds this year after taking into account the effects of inflation. Prices in the UK were rising by 5.5 per cent on average in the last 12 months till January 2022, marginally higher than the 5.4 per cent price rise seen up to December 2021. As a result of the pandemic, inflation around the world is a common trend, partly a result of supply-chain issues.
Change in consumption during the pandemic
The Organization for Economic Cooperation and Development (OECD) which comprises mostly developed economies notes that the 2020 Covid-basket weights for food and non-alcoholic beverages, housing, furnishing, health, communication and miscellaneous goods and services tend to be larger than that in the 2019 pre-Covid-basket because the expenditures on these items were maintained during the pandemic while overall consumption fell.
An International Monetary Fund (IMF) working paper noted that because of the pandemic lockdowns, staying at home and social distancing caused sharp declines in spending on items consumed or used outside the home. Some households also curtailed their consumption of non-essential items as a result of falling income, which further boosted the importance of food and housing in their budget.
What’s in, what’s out in this year’s basket?
This year, the UK’s Office for National Statistics (ONS) has added 19 items to the Consumer Prices Index and removed 15 items. The items that were added in this year’s basket include meat-free sausages, canned pulses, sports bras, pet collars and antibacterial surface wipes.
Among the removed items are men’s suits, donuts and coal. The suit has been replaced with a men’s formal jacket or blazer because ONS noted that a few retailers withdrew the former from their outlets. Because of this it was difficult for the ONS to collect price quotes. It is possible that the demand for men’s suits fell because more people have been working from home and therefore, don’t need as much formal wear.
Other reasons to exclude certain items may be because of changes in the law or because of environmental reasons.
Coal has been dropped because its usage will be banned in 2023 as part of the government’s plan to combat climate change. Donuts, which represent individual cakes, were also removed because their sales have fallen probably because of the rise in homeworking. Even so, multipack cake items still remain in the CPI basket.
As of February 2022, the weight of housing and household services is the most in the basket, followed by transport and recreation and culture in the UK.
In India, on the other hand, the CPI basket consists mainly of food articles. Food and beverages carry a weight of about 45 per cent, followed by miscellaneous services (28 per cent), housing (10 per cent) and fuel and light (about 6 per cent).
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