This talks about the annual reshuffle of the goods basket used to calculate the CPI and inflation in the UK. It gives an interesting look into how priorities and culture changes in society even over a period as short as one year. DVD recorders were dropped while online streaming sites such as Netflix were added, reflecting a change in technology and taste. The Office for National Statistics also changed the weights attached to each item to account for a change in the cost of living. Inflation in the UK as been below the targeted 2 percent, causing many to hope that the economy is on its way to recovery.
http://www.theguardian.com/business/2014/mar/13/inflation-basket-netflix-flavoured-milk-dvd
These things really show this measure of inflation meaningless and disconnected from reality and I do not believe its worth considering when setting interest rates and key economic factors.
ReplyDeleteRecovery is defiantly a possibility based on your article but I believe we will see bad before good. This is because the tensions in Ukraine are continuing to rise and it almost seems intimate the UK and United States will play some role if there is war. Russian's economy is so poor right now because of their economy is based on heavy industry but had very poor service sectors. The workforce was extremely inefficient because manufacturing sectors employed way too large a percentage of the work force. Banking systems practically were also non-existent and management of state finances were terrible. The Russian economy has created a ripple effect of the UK economy as well as economies throughout the globe.
ReplyDeleteI believe UK government took the right initiative to change the basket goods and the weight of the basket to calculate a more accurate CPI to determine inflation. Technology is improving constantly resulting in new tendencies and behavior by consumers and the government must adapt to such things allowing them to provide more reliable and accurate statistics for the public.
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