Changing the basket for CPI

The ONS have looked at spending patterns in the economy and decided to change the basket of goods which the CPI is measures by.

Remember that the CPI is based on the change in the prices of the representative basket of goods. The goods in the basket are based on the share of total expenditure of the average household.

Each good is given a weight according to its share of the total basket. If the average household spends 10% on a good then its weight (share) of the CPI basket is 10%.

Well almost. Not every good is included, only those which are significant enough and only about 700 goods make it.

The ONS have changed the basket to take account of changing spending over the last year. The BBC explains what is in and what is out in the article below.

The BBC article is here

Policy options? Blue sky thinking

The Budget will take place next week and this year the calls for radical policy options are louder than usual.

The reason for this is that after over four years of economic stagnation people are getting desperate. Usually recessions end quickly and life returns to normal, the pain of recession concentrated on the unfortunate few.

It is difficult to find anyone who has not been affected by the current crisis. Lower real wages and lost purchasing power of savings has lead to the pain being spread widely. Of course those who have lost their jobs, or left education and failed to find one, have been really hurt.

So what could be done? The BBC have a survey of some interesting alternatives. George Osborn is unlikely to listen.

The BBC article is here