UK adds to basket of goods used to calculate Consumer Price Index
The Consumer Price Index is an economic indicator that refers to the cost of goods and services. The U.S. Bureau of Labor Statistics figures the CPI based on a figurative basket of products that are indicative of things most people purchase. In the United Kingdom, that basket of CPI goods has been updated to include several new products.
The United States basket of goods
In the United States, the Consumer Price Index basket of consumer goods is figured based on “urban consumers and urban wage earners.” Representing about 87 percent of the United States population, the basket was last adjusted in 2008. Survey information is collected for two years from about 7,000 families, and the most common products are included in the basket. Food, personal care products and home products are all included in the basket. The cost of fuel, fees on same day loans and most services are not included.
Updates to the UK basket of goods
The United Kingdom just completed the periodic update to its Consumer Price Index market basket of goods. The new U.K. Consumer Price Index will be figured based on a variety of modern products. Flatscreen TVs, smartphone apps, TV dinners and even dating agency fees are included. Sparkling wine, dried fruit and craft kits are also included in the new basket. Though the new basket was mostly updated to reflect products that are purchased more often, some previously underrepresented products, such as hardback books, were added.
The real-world impact of the CPI
The Consumer Price Index, in just about every country, is used as a measure of inflation. The CPI also serves as a “real-time” measure of the cost of living. The calculation of the CPI has been heavily disputed and is often adjusted according to the recommendations of economists and Congress. The inflation rate informs the decisions of the Federal Reserve, which adjusts interest rates. Interest rates affect how much it costs to borrow payday loans and other types of money, purchase goods and services. The cost of living and CPI are also the basis for figuring the Cost of Living Adjustment – COLA – for Social Security.