Pints of Guinness, cinema popcorn, haircuts and airport parking were all stripped out of Britain’s latest inflation basket as statisticians tried to calculate price changes in the middle of the coronavirus lockdown.
In the first inflation reading since the country went into lockdown on 23 March, the Office for National Statistics said the prices of 90 items, or nearly a fifth of the consumer prices index, would not be included in April’s inflation figure, today revealed as 0.8 per cent, as consumers could not purchase them.
The ONS said it sought to calculate inflation based only on ‘the price movements of those goods and services that consumers can purchase’, which would allow ‘the all-items index calculation to be relatively unaffected by unavailable items’.
Some 92 items were thrown out of the inflation basket in April as consumers couldn’t purchase them during the lockdown, the Office for National Statistics said
It said: ‘some goods and services such as drinks at a pub are not available at all’, and no attempt would be made to collect those prices.
Of the 90 items and services removed from the basket used to calculate the CPI in April, released today, most were for sectors of the economy which had been effectively mothballed under the government’s lockdown.
Alcohol including cider, gin, lager, stout, wine and vodka that would usually be served in Britain’s now shuttered pubs was removed from consideration as there was no way to measure their prices.
Other removed goods and services included men and women’s haircuts, the cost of tradesmen like decorators, electricians and plumbers, and cinema tickets and popcorn.
With the Foreign Office advising against all non-essential travel abroad, airlines cancelling flights and people told to stay at home throughout the entire month, unsurprisingly coach, ferry and plane tickets and airport parking charges were all ditched in this month’s release.
The ONS also revealed earlier this month its back-up plan to check prices in April having been unable to do so in person.
Employees of the ONS and market research company Kantar usually collect prices in shops, which also allows them to determine the market share of individual items by how much shelf space they take up.
Some 45 per cent of the CPI basket is usually worked out by price collectors making in-person visits to 140 locations.
Instead, the ONS said Kantar would collect as many prices as possible from retailers’ websites, and those without a website would be called up or asked to email over prices.
In an indication that even government statisticians are having to change their way of working in light of the pandemic, the ONS said these measures would likely continue ‘for as long as social distancing policies are in place.’
David Miles, a professor of financial economics at Imperial College London and a former Bank of England rate-setter, wrote recently that inflation was ‘almost impossible to measure accurately’ at the moment.
He told This is Money: ‘The problem now is that many types of shop have been closed for several weeks so it’s hard to get accurate prices.
‘How do you work out what has happened to the price of a haircut when none are open, and you cannot buy a haircut from Amazon?
‘The ONS usually use a mix of prices in shops and online prices for the inflation measures.
‘If they suddenly have to rely on just a small subset of the usual sources because shops are not open, then the measure becomes volatile and less reliable.
‘With haircuts, an extreme example, it just becomes impossible.’
Simon French, chief economist at the investment bank Panmure Gordon, also said it might become more difficult for statisticians to accurately measure inflation in the future if people’s habits continue to change as a result of the coronavirus, leading to the risk of publishing an inflation figure out of step with people’s lives.
He said: ‘At present the weights used by the ONS are largely based on our stable consumption patterns of goods and services. That creates big problems if that changes quickly.
‘We may find that the statistical agencies struggle to keep pace with getting a measure that people recognise and gains a “social licence”, while it is also tough for the Bank of England to communicate policy if it has doubts over the validity of their target.’
John Athow, deputy national statistician for economic statistics at the ONS, wrote on 6 May: ‘The disruption to our daily lives from coronavirus has made compiling many of our economic statistics more challenging.’
Pandemic price changes: A piece of cake or a dog’s breakfast?
Every morning, at around 6.30am, Indie the 10-year-old Golden Retriever (pictured) is given one-and-a-half mugs’ worth from a 15kg sack of chicken-flavoured dry dog food.
She is given the same again at 5pm, and when the sack is emptied it is replaced with another one from Pets at Home. For Indie’s owner, it is relatively easy to work out price inflation.
They simply need to check their credit card statement to see how much the 15kg bag cost them last time, and then Pets at Home’s website to see how much it costs now.
Britain’s national statisticians have a slightly tougher job. There are more dogs, not to mention cats and birds, more food, and more shops to consider.
Working out price inflation for one specific bag of dog food is easy enough, but doing it for every one in the country is a lot trickier
For them, assessing the changing price of pet food, which is represented in the CPIH inflation basket in the form of dog food, cat food and bird seed, requires looking at prices, from major UK supermarkets and shops like Pets at Home, all the way down to local independent pet shops, which may not even have a website.
Often, this is in done in-store with price-checkers taking in tablets and manually noting down prices. This also allows checkers to determine how much shelf space an item like dog food takes up, which helps work out how much weight to give it in the inflation basket.
That is harder to determine online, as supermarket websites often just list items.
The lockdown and the spread of the coronavirus means the ONS and market research company Kantar now have to rely more on prices from websites, or phone up or email other suppliers. That’s a lot of pet food to digest, even for a hungry dog.
Price volatility eases as lockdown goes on
An experimental effort to look at how in-demand items like paracetamol, pasta and pet food have changed in price each week since just before Britain went into lockdown suggest price changes have calmed down in recent weeks.
The ONS put together a basket of 24 items it saw high demand for in the run up to the lockdown, which has increased by about 1 per cent between 16 March and 4 May.
The basket is worked out using data scraped from the websites of seven major online shops.
While some items continue to fluctuate on a weekly basis, figures from the Office for National Statistics suggested prices of household staples were stabilising
Prices were initially erratic, with the cost of flour increasing 1 per cent in the first week before dropping 0.6 per cent over the two following weeks, and the prices of paracetamol and pasta sauce increasing 5.4 per cent and 2.3 per cent between 16 March and 30 March.
Some Britons may put that down to the scenes of stockpiling seen in supermarkets as people believed the country was about to go into lockdown.
But since early April prices have stabilised, the ONS figures found, with the cost of items frequently changing by only a few tenths of a percentage point each week, likely coinciding with shopping habits returning to something close to normal.
Which staples have risen or fallen the most in price since the week before Britain locked down?
However, the price of Vitamin C tablets and rice both fell 0.6 per cent between 27 April and 4 May.
Overall, tinned beans have gone up most since 16 March, rising 4.9 per cent, with baby food falling 1.5 per cent.
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