At a time when the U.S. barometer of inflation — the Consumer Price Index — is running at a 40+ year high of 7.9% and attracting more attention and scrutiny than it has seen in decades, British bureaucrats have beat America to the punch by modernizing their official basket of goods to better reflect consumers’ current consumption habits.
In a raft of revisions rolled out Monday (March 14) from the U.K.’s Office of National Statistics, men’s suits, doughnuts, coal and a dozen other goods and services have been given the boot from the government’s survey sample. At the same time, 19 new items have moved in to take their place, including meat-free sausages, sports bras, pet collars and antibacterial surface wipes.
In justifying the changes, the UK agency noted on Twitter that the increase in people working from home was the reason why men’s suits were being replaced with men’s formal jackets (or blazers as we say in the U.S.). At the same, the departure of donuts was made due to declining sales, while domestic coal was kicked out as sales are being banned in the country in 2023.
Building A Better Mousetrap
Economic research into price changes is hardly a new science, but after two unprecedented years of COVID-related lifestyle changes that have altered the way consumers everywhere live, shop and work, some sort of a revision that reflects those changes would seem to be in order.
To that point, the U.S. Bureau of Labor Statistics, which oversees and manages the CPI, says that it revises the index every two years and also routinely adjusts for seasonal changes after the fact, but that the average lag time for price and product changes to be reflected is about 3 years.
Even so, the U.S. version of inflation is a massively complex calculation that involves 20,000 telephone interviews and 10,000 consumer diaries per year involving 80,000 different items that consumers purchase on a daily basis.
“The CPI market basket is constructed with an adequate sample size for each of the more than 7,000 groupings of goods and services in selected cities used,” the BLS said in its FAQ section, pointing to the price “bananas in Boston, MA, [vs] car repair services in San Francisco, CA” as an example.
Why It Matters
Whether the U.S. — or U.K. — CPI methodology is a more accurate or relevant barometer of the cost of living a typical consumer might face is a debate for the ages.
While it might seem fun to highlight changes such as doughnuts, that headline official number distilled from all that data matters a lot and carries sweeping ramifications. Not only is CPI used to calculate annual increases in government benefits such as social security, it is also used in all budget calculations as a built-in baseline for growth.
The data — and subsequent news coverage of them — also hold a significant influence on consumer sentiment and confidence, as the more inflation gets discussed, the more likely it is to dampen individual spending, shopping and savings habits.In short, the combination of real-time personal pricing experience along with widely reported government data could prove to be an opportunity for retailers to listen to and adapt to their customers’ changing needs, whether that involves donuts, coal or suits.