Persistent price inflation in the UK above the government target of 2% set for the Bank of England’s Monetary Policy Committee (MPC) has dominated the monetary economic headlines for many months. It has also been the subject of several blog postings on Biz/ed, for example, here and here. But whatever the arguments for or against interest rate rises to choke off the tendency of prices to rise above target rate recently, one area of monetary policy that only occasionally gets discussed hit the headlines yesterday.
The news was about the way that the rate of price inflation is calculated. Specifically, it was about the items used to measure overall changes in the price of goods and services bought by consumers. To ensure that the two main indices of inflation – the Consumer Prices Index (CPI) and Retail Prices Index (RPI) – actually reflect what people spend their money on, the Office for National Statistics (ONS) selects a typical ‘basket’ of goods and services and measures changes in the prices of these items. Yesterday, the ONS announced which items which comprise the UK’s ‘shopping basket’ in 2011.
The ONS produces a handy guide to the reasons why the goods and services in this basket are selected. This makes for interesting reading, but in case you don’t have time, many news organisations have produced their own digest of the main factors. As you would expect, Biz/ed is no different, although like many other reports, we focus on some of the more eye-catching items that have been included and those they have replaced. Among the items that have been dropped are four-packs of lager cans, cigarettes from vending machines and mobile phone downloads. New items include smart-phone handsets, flat panel TV sets, craft kits, hardback fiction books and hair conditioner.
But the one item that really got news organisations ‘hot under the collar’ is that of dating agency fees. Several commentators scoffed at their inclusion, doubting the relevance of ‘lonely hearts clubs’ or ‘personal introductions’ services. But the dating agency market has grown to an estimated value in excess of £100m, with a burgeoning online segment as people increasingly appear to find the internet an effective place to search for a partner. This report cites Mintel data suggesting annual market growth in web dating sites of 20%. According to Mintel, more than 5m Brits are signed up to an online agency.
The ONS data contain some fascinating insights into UK consumers’ spending patterns. To produce the data, around 180,000 separate prices are gathered every month in around 150 different UK locations. The RPI and CPI baskets comprise more than 650 goods and services. This provides a snapshot of British consumer behaviour. The differences between the two indices and the reasons why one is preferred over the other will be the focus of tomorrow’s blog entry. But for now, do you think the growth of online dating is proof of the demise of face-to-face social contact? Does its inclusion in the calculations of RPI and CPI mean that love in the UK is actually a basketcase?