'Basket' of goods and services used to calculate inflation has some new items.
E-cigarettes, craft beer and music streaming services are among the new items being added to the basket of goods and services used to calculate price inflation, the Office for National Statistics (ONS) has announced.
The ONS tracks the prices of over 700 items in order to calculate the Consumer Prices Index (CPI) measurement of inflation. This basket is updated each year to more accurately represent the spending habits of the British public. Items are only included if we spend £400 million a year or more on them or similar items.
Thirteen items have been added this year, eight have been removed and 16 have been modified. Let’s take a look at what’s in and what’s out.
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New additions
The following are going into the inflation basket.
- E-cigarettes
- Craft beer
- Music streaming services
- Online console computer games subscriptions
- Headphones
- Mobile phone accessories
- Protein powders
- Melons
- Sweet potatoes
- Liver
- Chilled pizza
- Gammon/pork oven-ready joint
- Non-white emulsion paint
On the way out
And the following are leaving the inflation basket.
- Frozen pizza
- Home-killed beef/braising steak
- Oven-ready joint (Replaced by gammon/pork over-ready joint as a result of European classification changes)
- Yoghurt drink
- White emulsion paint
- Sat nav systems
- Cut flowers, lilies
- Foreign exchange commission
Why does it matter?
[SPOTLIGHT]There’s more to the inflation figures than simply giving us an idea of how the cost of living is changing.
They are used by the Bank of England’s Monetary Policy Committee to help with Base Rate decisions. A significant factor behind the expectation that Base Rate will not now rise until well into 2016 has been the dramatic fall in the rate of inflation.
But benefits, pensions and even train fares are also tied directly into the inflation measurements. The September CPI figure is used as the figure by which to increase a number of benefits such as the carer’s allowance and the personal independence payment, as well as the annual ISA limit, while it’s also used as part of the ‘triple lock’ guarantee to work out the increase in the State Pension.
Meanwhile the Retail Prices Index (RPI), another measurement of inflation which includes other items such as mortgage payments, is linked to things like increases in water rates, train fares and fuel duties.
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