Measuring changing shopping habits and inflation

As students learn about the impact of external economic influences such as inflation, it might be helpful to look at the changes the Office of National Statistics have just made to the way in which they calculate the average level of inflation for the UK. Each year they review the so-called ‘typical basket of goods’ that is bought by households, so that they can measure changes in the price of those goods over the coming year. This enables them to make sure that the prices they are monitoring are for the goods which are most relevant to the average household in the UK – the aim is to update the basket to reflect changes in our pattern of spending.

The composition of the basket is therefore a useful source of secondary research for businesses, as it should accurately reflect broad changes in preferences amongst UK consumers. The 2010 version shows an increased interest in personal health, with bottles of water replacing cans of fizzy drink and the introduction of cereal bars and allergy tablets as important elements of spending. Lipgloss replaces lipstick, hair stylers replace hair dryers and computer games consoles replace squash court hire – analysis of this sort of data could be very useful for all kinds of companies as evidence of changes in the market.

This BBC news article gives a useful description of how the inflation rate is calculated, as background to A2 external influences.