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How often is the basket of goods updated?

Relevant Topics

This question pertains to topics in Macroeconomics, such as Price Indices and Inflation

Definitions:

Basket of Goods: A bundle of consumer goods and services valued on an annual basis and used to calculate the Consumer Price Index (CPI). This basket is supposed to represent the spending habits of the average consumer.

Consumer Price Index (CPI):
An index which measures the average change over time in the prices paid by consumers for a basket of consumer goods and services.

Detailed Explanation:

The basket of goods is updated on a regular basis to accurately reflect changes in consumer spending habits and preferences. In the United Kingdom, the Office for National Statistics (ONS) is responsible for determining the contents of the 'basket of goods and services' and it is usually updated annually.

The basket contains hundreds of goods and services, with their relative importance in calculating the CPI based on the amounts households typically spend on them. As society and technology evolve, people start buying new products, stop buying others, and spend different amounts on others. This evolution is reflected in the basket to ensure it remains representative.

Recent: 

In March 2021, the ONS announced updates to the UK's CPI basket of goods. New additions included hand sanitiser and men's jogging bottoms, reflecting changes in consumer behaviour due to the COVID-19 pandemic.

As an example of items being removed, the ONS removed nightclub admission from the 2021 basket due to the closure of these venues during the pandemic.

Summary:

In conclusion, the basket of goods used to calculate the Consumer Price Index (CPI) is typically updated annually. This ensures it accurately reflects current consumer spending habits and living standards. The basket is continually evolving, with items being added and removed based on changing trends in consumption.

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