MNI:Weightings May Distort 2022 UK Inflation Data- ONS Advisor

A move by the Office for National Statistics to calibrate its 2022 consumer price baskets based on pandemic spending patterns runs the risk of distorting its data, ONS advisor Martin Weale told MNI.

The ONS will carry out the first stage of its reweighting next week when it releases its January CPI and CPIH data, whose baskets will be recalibrated according to spending patterns recorded up to December 2020. February’s inflation releases, due in March, will be reweighted to January 2021. The use of recent pandemic spending patterns as a base will be in line with the approach taken by Eurostat, but Weale questioned whether consumer spending patterns in 2022 are more likely to resemble those seen before the pandemic.

"2019 is probably a much better guide to current consumption patterns than 2020,” said Weale, also a former member of the Bank of England Monetary Policy Committee. “What you want is the best representation you can have of current expenditure patterns and I am really not sure that 2020 is that.”

ATYPICAL PATTERN

Last year’s economic recovery, with GDP up 7.5%, the fastest peace-time growth in almost 100 years, saw spending skewed towards goods and away from parts of the service sector. If this pattern turns out to be atypical, and not a new normal, the weights used for inflation this year could be distortionary.

In 2021, the ONS broke with precedent by basing CPI and CPIH weights on the first three quarters of 2020, rather than using 2019 in line with past practice. A spokesperson for the Office declined to comment, but noted Eurostat’s guidance, from November 2021, which recommended that HICP weights used in 2022 “should be representative of the consumption pattern in 2021.”