Business Irish

Monday 18 December 2017

Changing tastes and technology make inflation more than just numbers game

Sarah McCabe

Sarah McCabe

MOST of us are used to looking at the monthly inflation statistics but how does the Central Statistics Office gather its snapshot of what is happening to prices?

The CSO's basic tool is the so-called basket of 632 goods and services used by the statistics agency's army of checkers to work out average price changes.

Evolving technology and consumer behaviour means that goods which might once have been popular, and provided a good snapshot of the economy, such as video players, can quickly become obsolete.

The CSO reviews this range of products once every five years with the last review held in 2011.

Two years ago, the CSO removed frozen sweetcorn and ice cream cakes from the list – a nod to evolving tastes of the public.

The removal of concrete blocks and the cost of boarding at secondary school is more likely to be connected to post-recession budgets and priorities. DVD rental and players were also removed, perhaps telling a truth that the film industry is slower to admit.

New additions included pregnancy tests, maintenance charges for apartment blocks, bottled mineral water and music downloads.

Even the modifications to existing products reveal changing consumer tastes. The hair dryer category was extended to include stylers, no doubt a result of young women's new-found fondness for hair straighteners; a product that definitely didn't find much favour with the big hair of the nineties.

The National Car Test (NCT) was meanwhile given a category of its own.

The "doctor's fees" category was split into "general practitioners fees" and "specialist fees", a distinction that the wallets of those who have attended consultant clinics will attest to.

Once these expenses are selected, the CSO gives them a 'weight' – meaning changes to the prices of certain goods will mean more to the overall index than changes to the prices of others.

Meat is more heavily weighted than fish since consumers buy more of it.

The weighting system has recently been amended; the CSO will now review the weights of each product on an annual basis.

This should ensure that the consumer price index represents a more accurate picture of price shifts, even three or four years after the basket of goods and services it monitors is set.

Yet an overall review of these products will still occur only once every five years.

It will be interesting to see whether hair straighteners still make the list when compiled in 2016.

Irish Independent

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