Thursday, July 30, 2009

Technology shifts reflected in ‘shopping basket’

DVD recorders, satellite navigation (satnav) systems and digital (DAB) radios are among 20 items included for the first time in the “shopping basket” the Office for National Statistics (ONS) uses to measure inflation.

Changes in food consumption patterns also feature in the new basket, with broccoli and olive oil replacing Brussels sprouts and vegetable oil.

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 make collection easier or to improve coverage of particular categories.

Similarly, items are dropped for a variety of reasons. For example, diamond solitaire rings replace gemstone cluster rings for the simple, and unromantic, reason that it is easier to collect prices for them.

Among consumer technology items, spending on satnav systems has now reached a level that demands their inclusion. DAB radios, sales of which have grown steadily in recent years, replace radio/CD/ cassette players, on which expenditure has fallen.

The growing popularity of flat-panel TVs is illustrated by the inclusion of a second, smaller type in the basket, replacing portable TVs, while old- style deeper widescreen TVs drop out.

Digital cameras have been included in the basket since 2004. This year digital processing - now readily available at many shops and supermarkets - is included for the first time in place of mail order developing.

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