5.Changes to the baskets in 2020
Changes to the baskets of goods and services this year are being introduced with the February 2020 consumer price inflation statistics to be published on 25 March 2020. The baskets will be updated again at the same time next year.
New additions to the baskets in 2020 and those items removed are set out in Tables 2 and 3, together with a summary of the motivation for these changes. As the tables make clear, these motivations are diverse. As in previous years, changes to the baskets in 2020 certainly should not be viewed as a simple indicator of those products or services whose popularity has either grown or fallen significantly over the past year. All of the changes made this year affect all of the consumer price indices.
A number of new items have been introduced to represent specific markets where consumer spending is significant or growing and existing items in the baskets may not adequately represent price changes for such goods. For example, gluten-free cereal has been added to reflect increased shelf space and consumer spending on gluten-free foods. Its inclusion complements the existing non-dairy milk drink in the baskets and expands coverage of “free from” products. Similarly, a pre-mixed spirit drink has been introduced to represent a “cocktail in a can”, reflecting an increasing number of brands introducing this type of spirit mix to their ranges.
In addition to introducing items to represent distinct sectors or markets, some items have been added to diversify the range of products collected for already established groupings, usually where spending is significant. For example, a re-usable bottle or mug has been introduced highlighting a trend of consumers moving away from single-use bottles and mugs, possibly influenced by membership of fitness clubs and more recently environmental concerns surrounding single-use plastic. Vegetable crisps have been added to help aid interpretation of data in the crisps area where prices can be volatile because of promotional activity from retailers.
Whilst gin is already part of the baskets in the spirits “off sales” class, it has now been introduced as a new item in the “on sales” area to reflect its increasing popularity in bars and restaurants shown by the wide range of varieties and flavours available and the associated increase in expenditure.
Finally, airport parking is a further item that has been added to help diversify the range of products collected in its class, “other services in respect of personal transport equipment”. The existing car park item represents short-term parking typically used by shoppers or those working in the local area whereas the new item will capture charges incurred over a longer period of time.
Analysis of the broad balance of the existing sample of representative items across CPIH highlighted the scope to reduce the number of items in the audio-visual part of the baskets. This has been achieved by replacing separate DVD player and Blu-ray disc player items by one combined item. The decision to replace the two specific items was based on their low weight in the section but the change has been made principally as part of the rebalancing of the baskets to improve their representation of overall price change and not the spending on or product history of the two items.
This aim of rebalancing the baskets can also apply within specific categories and, this year, crumpets have replaced individual fruit pies in the bread and cereals class. Crumpets are not used as a dessert in the same way as fruit pies and their inclusion improves the balance of bakery products, with desserts still represented by a sponge and individual cakes.
In other cases, new items are direct replacements for similar products with the change made for a variety of reasons. Computer games exhibit one of the most volatile price series in the baskets, which can make interpretation difficult for users. To attempt to address this, the existing shop-bought item is being replaced by three game items defined by platform. This will result in more price quotes being collected for a wider range of games in total and will split the weight of the existing item. In turn, this should improve the reliability of the overall series and aid interpretation.
A further example is the replacement of an MP4 player by a portable digital music player. The rise of smartphones has reduced the popularity and availability of MP4 players on the market and replacing it with the more widely defined portable digital music player will increase the number of products that can be priced and hence the number of price quotes used in the index. The new item will continue to include MP4 players but also allow, for example, MP3 players to be priced.
A final type of replacement 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 beef roasting joint has replaced a beef topside joint where the number of price quotes used each month has been falling as a result of unclear labelling and reduced availability in shops. Research has found that the new item would be easier for collectors to price, would result in more consistent pricing and have better coverage that the previous item. Similarly, fresh diced or minced turkey has been introduced as a direct replacement for turkey steaks, with research showing that diced or minced turkey is more readily available for pricing.
As noted earlier, it is important that growth in the overall size of the baskets is limited each year so that production costs and processing times may be contained. Also, that it retains its relevance by removing historic items that no longer attract much spending. A number of items therefore have been removed from the baskets in 2020 to make space for the new additions.
In some cases this reflects low or decreasing expenditure, and resulting falls in stock levels, such as with frozen imported legs of lamb. This item has been dropped because of falls in the number of price quotes being collected, with research suggesting stock levels have reduced over recent years. The removal of this item has a direct effect on the detailed breakdown published for the Retail Prices Index. Previously, indices have been published for home-killed lamb, imported lamb and lamb in total but this was the only imported lamb item in the basket so, from the publication of the February index in March 2020, only a total for lamb will be released.
In other cases, removal does not necessarily imply that the markets for these goods and services are very small or are declining significantly. Some items have been removed to make way for new additions to the baskets within the same product grouping. For example, this year, individual fruit pies have been replaced by crumpets. As already mentioned, the change rebalances the bakery products within the bread and cereals class and the individual fruit pies will continue to be represented by the individual cakes item.
In some cases, a product will remain represented in the baskets even if there is no longer an explicit item. For example, an MP4 player has been removed but some prices will continue to be collected as part of a more widely-defined portable digital music player item.
Elsewhere, analysis suggested that there was scope to remove items from certain product groupings without any significant loss of precision in estimates of price changes overall. Within these groupings, items are generally chosen that have relatively low index weights, that are variants of others or have a relatively low number of price quotes. This year, frozen chicken breasts have been removed because they have a lower weight than other uncooked chicken items and there is a degree of overlap with fresh chicken breasts; car batteries have been removed from the “spare parts and accessories” class because of the number of price quotes collected being generally lower than for other items in this part of the baskets; and softwood has been chosen for removal in preference to medium-density fibreboard (MDF) in the “materials for maintenance and repair” class because of MDF being more commonly used for do-it-yourself work around the home.
Collection issues can influence changes and, as already mentioned, a beef topside joint has been removed partly as a result of unclear labelling. A further example is bank overdraft charges. Most banks are in the process of dropping their fixed service charges and replacing them with a single interest rate on overdrafts. However, international regulations specify that interest payments are out of scope of consumer price indices, so the existing overdraft charge is being dropped in anticipation of the change, which most banks report to be introducing in March or April.
Back to table of contents