What is the 'basket of goods' and why does it matter?

Inflation up two per cent! Prices rising faster than ever! We’re all used to seeing the headlines when the Government’s statisticians announce that prices are on the rise.

Behind these figures, however, is a constantly changing ‘basket of goods and services’ which is used to calculate how the cost of living is changing, but which also reflects our evolving spending habits.

The contents of this ‘basket’ are decided by statisticians at the ONS (Office for National Statistics). Since it is meant to represent our average spending, it has changed hugely since the earliest version, which was launched in 1947 at the end of the Second World War, showing just how much our tastes and pastimes have changed.

From rabbit and candles to television rentals

The basket of goods and services is meant to represent a typical family’s spending.

After the war, items in the basket included a man’s bib and brace set as well as a Derby tweed hat and meats such as corned beef and rabbit. Statisticians looked at the rising cost of candles, coal and a nip of whisky, while the price of leisure pursuits was represented by the going rate for football admissions.1

By the 1960s, statisticians were monitoring the price of chicken, while rabbit had fallen out of the inflation basket. The inclusion of frozen chips and croquettes showed how many families had gained a freezer, while television set rentals joined football admissions as part of Britain’s leisure spending.

The inflation basket of 1980 included fizzy drinks, canned pet food for our furry friends, and a slew of DIY materials, reflecting our interest in upgrading our homes. Women’s jeans also became a staple of the basket, rather than the suit or costume of the 1960s.

A technological revolution

As the 1980s gave way to the 1990s, a new era of technology dawned, all reflected in the nation’s inflation tracking basket of goods and services. Statisticians compared the rising prices of personal computers, floppy discs, CDs and CD-ROMs, camcorders, and video cassettes.

Mobile phone charges entered the inflation basket in 1998, while at-home computer printers and the short-lived mini-disc player were included in the 1999 shopping basket.

Changing tastes

Even as new technology has been added to the basket, the items that have been removed reflect changing fashions in the things we buy and consume.

By 2010, bar soap had been replaced with liquid soap as the most common type to buy, menthol cigarettes were dropped in 2016, while pork pies and Edam cheese were removed in 2017.

This year, the ONS dropped Axminster and Wilton carpets from the basket, after deciding that these are no longer used on many homes, but only in commercial premises

Pandemic changes

As with so many things, the pandemic changed the makeup of the basket of goods, reflecting our changing behaviour in lockdown and beyond.

This year, fruit smoothies have been replaced by fruit and vegetable smoothies, reflecting an even more health-conscious culture, while hand sanitiser and dumbbells for working out at home have been included.2

Men’s loungewear and women’s sweatshirts have been added to the basket to reflect the move towards more casual clothing for working at home, while hybrid and electric cars were also added this year for the first time.

A constant evolution

Our spending patterns have changed considerably over time, but as the ONS basket of goods becomes ever more diverse (it now contains over 750 items), its breadth and variety should remind us that while the Government’s published inflation rate shows how prices are rising overall, everyone’s experience of the rising cost of living is personal and depends on what they spend.

Your own basket of goods and services is probably composed somewhat differently from the ONS version, meaning your inflation rate is entirely individual.  And who knows, in a few decades’ time, smoothies and hand sanitiser may look as dated as rabbit pie and candles do today. 

1 https://webarchive.nationalarchives.gov.uk/ukgwa/20160108054353/http://www.ons.gov.uk/ons/guide-method/user-guidance/prices/cpi-and-rpi/cpi-and-rpi-basket-of-goods-and-services/index.html
2 https://www.ons.gov.uk/news/news/handspaceandplacewhatsnewintheinflationbasket