Coffee pods in, nightclubs out of the 2016 inflation basket

Coffee pods are in, while nightclubs are out of the new basket of goods used to calculate inflation

Coffee pods, women’s leggings and microwaveable rice have all made it into the basket of goods used to measure price inflation this year.

The Office for National Statistics (ONS) tracks the prices of more than 700 items, and that tracking is then used to calculate the Consumer Price Index (CPI) measurement of inflation.

Every year the ONS updates the basket to reflect our spending habits, with items only making it onto the list if we have spent more than £400 million on them in a year.

This means it can be an interesting look at the way our shopping habits have changed. Back in 1947 when the basket was first created it contained wild rabbit, ox liver, herrings, mutton and a mangle.

In the 1970s dried mashed potato was in, the teabag arrived in 1980 and Cool Britannia of the mid-1990s brought canned lager into the inflation measure.

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What’s in?

So what's been added to the basket this year?

Coffee pods – those George Clooney Nespresso adverts have worked their magic, with many of us now including coffee pods amongst our staples.
Microwave rice
Meat multipacks – these days a bowl of crisps won’t do as nibbles for guests, we’ve moved on to buffet-style cold meat selections.
Sliced cooked chicken
Lemons
Large chocolate bars
Cream liqueur
Women’s leggings – comfort dressing makes it into the basket, with the ONS admitting leggings are a “type of clothing not currently covered but widely purchased”.
Boy's t-shirt – replacing the boys branded sports top to better represent both the casual and sportswear looks of the nation’s boys.
Paint – gloss and emulsion have been merged in order to reduce the weighting put on DIY sales.
Software downloads – these replace CD-Roms as the ONS moves with the technological times.
Computer game downloads
Restaurant main course – eating out is booming so the ONS is merging meat or fish main courses and vegetarian main meals so that restaurants aren’t over-represented in the basket.
Nail varnish

What’s out?

Now let's take a look at what has been removed from the list:

Cooked turkey slices – not gone completely, but merged with cooked chicken.
Organic dessert apples – merged with normal apples to reflect the increasing popularity of organic fruit.
Organic carrots – again removed from their own category and merged with other carrots to reflect that they are becoming more mainstream.
Electrical sockets
Prescription lenses
Rewritable DVDs and CD-Roms – this older technology is being superseded by streaming.
Nightclub entry – a result of a sharp decline in the number of nightclubs charging an entry fee
Pub snacks

Why does it matter?

Tracking the prices of the goods in the basket isn’t just about coming up with an inflation figure. The Consumer Price Index (CPI) is used to make some big economic decisions.

The Bank of England’s Monetary Policy Committee factors in CPI when making decisions about whether to raise the Base Rate, for example. That has a knock on effect on the interest rate you earn on your savings and the amount you pay in interest on your mortgage and other debts.

The latest inflation figures are also used to decide whether to increase benefits, pension payments and transport tickets. Every September the CPI figure is used to determine how much a number of benefits will increase by, including carer’s allowance.

It also forms one part of the ‘triple lock’ guarantee that decides how much the State Pension will increase.

Similarly, the Retail Price Index, another measure of inflation using the basket of goods, is used to decide increases in your bills like water rates and train fares.

So making sure the basket of goods used for inflation measurement accurately reflects our spending habits is vitally important; if it lagged behind it wouldn’t be accurate and major economic decisions could be based on an incorrect idea of the nation’s spending.

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