Consumer price inflation basket of goods and services: 2022

• In 2022, 19 items have been added to the Consumer Prices Index including owner occupiers’ housing costs (CPIH) basket and 15 items have been removed.
• Additions to the baskets for 2022 include meat-free sausages, canned pulses, sports bras, pet collars and antibacterial surface wipes.
• Removals from the baskets include doughnuts, men’s suits and coal.

The contents of the baskets for 2022 are summarised in Annexes A and B, and the main changes from the 2021 price collection are discussed in this article and listed in Tables 2 and 3.

This update covers the Consumer Prices Index including owner occupiers’ housing costs (CPIH) and Consumer Prices Index (CPI). It also covers our legacy measure, the Retail Prices Index (RPI). The same changes have been made to the baskets used for all three measures.

The shopping basket

Consumer price inflation is the rate at which the prices of goods and services bought by households rise or fall. Imagine a very large “shopping basket” containing those goods and services bought by households. As the prices of the various items in the basket change over time so does the total cost of the basket. Movements in consumer price inflation indices represent the changing cost of the shopping basket.

Currently, around 180,000 separate price quotations are collected every month to compile the indices, covering around 730 representative consumer goods and services. These prices are collected in around 140 locations across the UK, from the internet and over the phone. In addition, around 300,000 quotes are used in measuring owner occupiers’ housing costs each month. This measure is based principally on data from administrative sources.

Within each year, the consumer price indices represent the changing cost of a basket of goods and services of fixed composition. In this way, changes in the consumer price indices from month to month reflect only changes in prices, and not variations in the quality and quantity of items purchased by consumers.

Although kept constant within the year, the contents of the basket and the associated expenditure weights are updated annually. This is important in helping to avoid potential biases that might otherwise develop, for example, because of the development of entirely new goods and services. These procedures also help to ensure that the indices reflect longer-term trends in consumer spending patterns.

Changes to the items and their associated item weights are introduced in the February index each year, but prices are collected for both old and new items in January. This means that the figures for each year can be “chain linked” to form a long-run price index spanning many years. In other words, price changes between December and January are based on the old basket, while price changes between January and February, and beyond, are based on the new basket.

In reality, there are three baskets, one for each of CPIH, CPI and RPI. The vast majority of items are the same in all three measures.

Consumer price indices, a brief guide: 2017 provides a helpful introduction to the concepts and procedures underpinning the compilation of the consumer price indices. These are described in much greater detail in Consumer Price Indices – Technical Manual and CPIH Compendium.

Representative items

There are some individual goods and services where typical household spending is so large that they merit inclusion in the baskets in their own right, such as petrol and electricity supply. More commonly, a sample of specific goods and services must be selected that gives a reliable measure of price movements for a broader range of similar items.

Several factors need to be considered when choosing representative items. Of course, the items must be easy to find by the team of people collecting the price quotes, ensuring that estimates of price change are based on an adequate number of quotes collected throughout the UK.

Since the consumer price inflation statistics are based on the cost of fixed in-year baskets of goods and services, ideally, they should be available for purchase throughout the year.

The number of items chosen to represent each product group within the indices depends both on the weight and the variability of price changes between the various items. It makes sense to choose more items in product groups where spending is high. However, if price movements of all possible items in the group are very similar, it is sufficient to collect prices for only a few.

Based on this, the allocation of items to broad commodity groups can be analysed, as shown for the 12 divisions of the CPIH in Table 1, and the balance used as a reference point for the annual review of the baskets.

Such analysis cannot tell us which items should be priced and so choosing a particular set of items to represent each area remains a matter of judgement.

Various sources of information are used including the Office for National Statistics’ (ONS) Living Costs and Food Survey (LCF), market research data, trade journals and press reports. Changes in the retail environment are also reported to the ONS by the price collectors.

It is important to note that the contents of the baskets and changes from one year to the next should not be given significance beyond their purpose as representative items used in estimating consumer price changes. Changes to the baskets will reflect evolving consumer tastes but only over a long run of years.

It should also be noted that most of the representative items remain unchanged in 2022. In total, 19 items have been added to the CPIH basket and 15 items have been removed. Also, 16 items have been modified in a total of 733 items. The modifications usually relate to the type of shop where items are priced.

Timing of changes

Changes to the baskets of goods and services this year are being introduced with the February 2022 consumer price inflation statistics published on 23 March 2022.

Additions to the baskets and those items removed are set out in Tables 2 and 3, together with a summary of the motivation for these changes. Changes to the baskets 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.

Additions

New items have been introduced to diversify the range of products collected for already established groupings. For example, meat-free sausages have been added to expand the range of “free from” products in the basket, reflecting the growth in vegetarianism and veganism. Antibacterial surface wipes have been added to the list of cleaning products to represent current cleaning trends together with the demand for antibacterial products in response to the coronavirus (COVID-19) pandemic.

Several new items have been introduced to represent specific markets where consumer spending is significant or growing and existing items may not adequately represent price changes for such goods. For example, frozen Yorkshire puddings have been added as there is currently no representative frozen cereal item in the index. A pet collar has been introduced because of increased consumer spending on pet accessories linked to the rise in pet ownership more generally since the start of the coronavirus pandemic.

Analysis of the existing sample of representative items across CPIH highlighted a need to improve coverage of price changes for recreational and sporting services, so a climbing wall session has been added. The games, toys and hobbies class contains several items whose prices tend to be volatile, making interpretation of the index more difficult. Adding a craft kit for adults aims to split the weight across more items, increase the number of price quotes being used, reduce the volatility and aid interpretation. Additionally, there is anecdotal evidence that this has been a growth area during the coronavirus pandemic.

In other cases, new items are direct replacements for similar products with the change made for a variety of reasons. For example, customer preference for beds has moved from doubles towards king-size versions, which were not previously priced. Analysis showed the indices for double-bed and single-bed items moved in broadly the same way, prompting a decision to allow an increased range of bed size to be priced within one item.

A further example is the replacement of some items of children’s clothing to anticipate an update to the international classification system (Classification of Individual Consumption by Purpose) used to subdivide the CPI and CPIH baskets into groupings for analysis. Pyjamas and pants for children aged between 18 months and 13 years are being replaced by the same items for children aged between 3 and 13 years. The new items will better match the terminology and age boundaries of the new classification.

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 man’s suit has been replaced with a man’s formal jacket or blazer. A gradual fall in spending on men’s suits, together with the decision of a few retailers to withdraw this item from their outlets, has led to collection difficulties and a fall in the number of price quotes that can be collected. The current menswear collection includes a pair of formal trousers so introducing this new item maintains the representation of the formal jackets without insisting on the “suit” requirements.

Removals

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. Several items therefore have been removed from the baskets in 2022.

At times, items must be removed in response to changes in the law or in response to environmental issues. Sale of domestic coal will be banned in 2023 as part of the government's actions to combat climate change. Dropping the item in 2022 protects the index from the possibility of being unable to collect price quotes towards the end of the year and from abnormal price movements, which could be seen as the deadline approaches for the ban to come into effect.

In some cases, items are dropped reflecting decreasing expenditure, such as dougnuts where research and anecdotal evidence from retailers has indicated that sales have fallen, potentially because of the rise in homeworking. Most individual cakes, which is what the "dougnut" item represents, are sold in multipacks, and a separate multipack cake item remains in the basket.

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, one brand of king-size cigarettes is being replaced by another brand of super king-size cigarettes to widen the range of sizes being priced and rebalance the brands based on expenditure data.

In some cases, a product will remain represented in the baskets. For example, eggs were previously represented by two items where prices moved in broadly the same way. One of those items has been removed from an over-covered area of the basket without any significant loss of precision to the overall index.

In January 2022, we highlighted how alternative data sources will allow the Office for National Statistics (ONS) to better reflect changes in not only prices but also consumers’ spending. Scanner data directly from supermarkets will be used in the headline Consumer Prices Index including owner occupiers’ housing costs (CPIH) and the Consumer Prices Index (CPI) from 2024, and we will be updating our article explaining our plans to achieve this in April 2022.