E-cigs added to inflation basket

March 19 2015

The growing popularity of e-cigarettes has seen them added to the basket of goods used to calculate UK inflation by the Office for National Statistics (ONS).

Sales of “craft” beer made by speciality and micro-breweries will also be included thanks to increasing demand from drinkers and presence on store shelves, the ONS said.

Meanwhile sat nav devices are being removed, partly because many drivers now navigate using smart phones while some new cars have inbuilt devices.

The ONS currently uses 703 items to compile the basket of goods and services to make up the Consumer Price Index (CPI). Changes in CPI are used to measure UK inflation – which is at an all-time low of 0.3% for January.

Changes in the make-up of the basket are often seen as tracking the shifting habits of the British consumer.

E-cigarettes have increased in popularity with a substantial number of smokers switching to them as they attempt to quit the habit.

Recent figures from a PwC study on the types of shops opening and closing last year on the high street also pointed to increasing demand as they boosted store openings in the tobacconist category.

Also included in the ONS list today for the first time are music streaming services – such as Spotify – as well as online console computer game subscriptions.

Contents of the CPI basket of goods and services, and the weights placed on them when calculating official figures, are updated every year.

The changes are designed to reflect shifts in consumer behaviour which may be caused by price or due to longer-term trends.

Headphones have been added to the list amid their increasing purchase alongside games consoles or as an upgrade to free pairs that come with smart phones.

Mobile phone accessories such as chargers or covers are also being added.

Other changes include the addition of protein powders – popular among some gym users – as well as melons and sweet potatoes.

Foreign exchange commissions are being removed as these are not generally charged in the UK while consumers are increasingly using bank cards to buy goods and services abroad, the ONS said.

Also taken off the list are yoghurt drinks, due to falling sales.

Frozen pizza has been taken off the list too to be replaced by chilled pizza, which has overtaken it in popularity.

Liver has been added to the list to represent the market for offal which has not been in the basket since 1999.

The ONS said 13 items were added this year and eight removed.

Those added were: chilled pizza, liver, oven-ready joint of gammon/pork, melon, sweet potato, protein powder, bottled speciality beer/ale, electronic cigarette refills/liquid, non-white emulsion paint, mobile phone accessories, headphones, games consoles online subscription services, music streaming subscription services.

Items removed were: frozen pizza, home killed beef/braising steak, oven-ready joint, yoghurt drink, white emulsion paint, satellite navigation device, cut flowers/lilies, foreign exchange commission.

Source: http://www.dailymail.co.uk/wires/pa/article-2998634/E-cigs-added-inflation-basket.html