Inflation: Yoga mats and VR headsets used to measure cost of living

The UK's Office for National Statistics (ONS) is using items such as yoga mats and virtual reality (VR) headsets to track rising living costs. These goods have been included in the basket of goods and services used by the ONS to calculate inflation rates, reflecting changes in consumer spending. The inclusion of these items allows for a more accurate representation of modern consumer habits.

The basket contains 752 goods and services. The ONS calculates the monthly inflation rate by collecting the prices of these goods and services from various retailers. This data is crucial because it affects borrowing costs (interest rates), the growth of benefits and pensions, and is used in wage negotiations. The accuracy of this data is paramount for economic stability.

The extensive basket of goods and services is reviewed annually to ensure it accurately reflects consumer spending. Each addition or removal of an item also reveals people's changing tastes, trends, and lifestyles. For example, the first list in 1947 included hare, while teabags were not added until 1980. These changes highlight the evolving nature of consumer demand.

This year, 23 items were added to the basket, and 15 items were removed. Stephen Burgess of the ONS stated that the inflation basket of goods demonstrates the evolution of consumer spending over the years. The first-time inclusion of VR headsets indicates people's interest in emerging technologies, while the addition of yoga mats reflects their increased popularity since the pandemic. This basket provides a snapshot of the changing economic landscape.

The ONS stated that spending on VR headsets is expected to increase from approximately £347 million last year to £520 million in 2029. Meanwhile, exercise mats are used not only for yoga but also for other types of home workouts. Men's sliders (or pool sandals) have also been added, while pulled pork has replaced oven-ready gammon. Mangoes have been added to the fruit selection, and cushions have been included to bolster the under-represented area of soft sofa furnishings. These additions reflect a shift towards convenience, health, and home improvement.

On the other hand, the decline in newspaper circulation and importance means that advertisements in local newspapers have been removed. The ONS stated that there are indications that many such advertisements can now be found on online platforms. Last year, vinyl records returned after a 30-year absence. Air fryers have also been added, but hand sanitizer – a necessity during the COVID-19 pandemic – has been removed. This showcases the dynamic nature of consumer behavior and advertising strategies.

Danni Hewson, head of financial analysis at investment platform AJ Bell, stated that while changes in fashion trends may be interesting, it is important to remember the significance of the basket. It provides us with a key economic indicator that reflects price changes, and this data helps the Bank of England's interest rate setters determine their next move and is used to calculate increases in benefits, pensions, and train tickets. Therefore, understanding the composition of this basket is vital for informed economic decision-making.