Hi °C | Lo °C IF ever there was a symbol of the excesses of the City of London during the bubble years, it was bubbly. Quite a large proportion of those bonus billions went on bottles of Bolly.
Now, sales of champagne have declined so much in the UK that it is no longer included in the typical basket of consumer goods used to measure inflation.
One is never sure how typical it is. Some 600 goods and services are checked in thousands of cases to arrive at the consumer price index, which is the "headline" rate of inflation. Not even my nearest and dearest would get through 600 items in the weekly shop.
Nevertheless, as the changes show, it is all quite scientific, with 5,000 households surveyed on their shopping habits, along with other data. In other signs of the times, staff canteen desserts went out, and nobody replaces sink taps anymore.
Presumably they buy a new sink. It might be better to call it the national shopping basket, since the real criterion is how much is spent on each item. The fall in the cost of manufactured goods is one of the truly striking features of our times.
UK number-crunchers amend their basket every year. Here it happens every five years. I don't think this is because the Irish are more set in their ways: more that it is an expensive bit of research. Five years seems enough to maintain a reasonably accurate inflation figure.
Or to track changes in lifestyle. The last Irish revision was in 2011 when, curiously, sink taps were popular enough to come into the index. Liquid soap replaced bars, and lemons cooking apples, while gluten-free foods and cycling helmets made it for the first time.
All of which seems very plausible. It is important that the index is accurate, and believed. Several organisations and outlets have discovered the publicity value of trekking round the supermarkets and doing price checks and comparisons. Comparisons are fine, but the merits of the actual price findings often seems pretty dubious.
The range covered is usually small but is trumpeted as a measure of the "cost of living". Even the official basket is an approximation of the cost of living but the private surveys are nearly always nothing of the sort.
They also exhibit a distinct tendency to find that prices are rising at a shocking rate, and to imply that this is somebody's fault. The index from the CSO tells a completely different picture. The cost of the national basket last month was the same as it was five years ago, when the crash began, and lower than in December 2008, before prices began to fall.
I was a bit surprised when I looked it up for this article. One knew the price-rise shock stuff was mostly nonsense but the actual figures are remarkable.
We should be glad that they are; prices being about the only thing we can be glad about. Falling wages and rising taxes have seen personal disposable income fall by more than 10 per cent since 2008. But at least rising prices have not added to the loss.
The situation is different in the UK. Over the same period, consumer prices have risen by 15 per cent. Wage cuts and tax rises have not been as severe, but they have happened.
The reduction in real incomes – purchasing power – would appear to have been greater in Britain than here. Rising prices are a government stealth tax, because they increase VAT. Mr Cameron's austerity may not be so obvious, but one can see why it is unpopular.
That is if you believe the statistics. One can understand the scepticism. No one – not just my wife – carries around the national shopping basket. Everybody has their own personal inflation rate. Smokers certainly do – their habit accounting for 5 per cent of total personal spending and having gone up in price by 5 per cent since 2011 when the new basket came into play.
There is also drink, which makes up 4 per cent of spending and had an 8 per cent price rise. Moralists might be inclined to leave these items out; in which case the cost of living has been even more benign.
In fact, the basket is a fascinating insight into what it means to be a rich country, however troubled, in the 21st century. Twelve per cent of spending goes on food, and 16 per cent on housing, some of which is furnishings and shiny conveniences.
But 15 per cent of spending is in restaurants, cafes and suchlike, while another 7 per cent is what could be called fun and entertainment.
Spending has fallen in many of these sectors, which helps explain the limited price rises in most of them. Both help explain the state of the retail sector, with another high-profile closure last week.
But there has been no great change in the patterns of spending. There must be considerable pent-up price pressure among retailers, desperate to make up for higher costs and lower sales with better margins.
It is less clear that there is pent-up spending pressure among customers, most of whom may be adjusting quite well to current more modest consumption patterns but still have a sharp eye on the cost of their particular baskets.
Irish Independent
