MNI INTERVIEW: UK's ONS Rewires Inflation Series For Covid

-UK ONS's Athow: Need Long Run Inflation Series, Alternatives

-Conventional Price Baskets To Keep Going For RPI, CPI Users

By David Robinson

     LONDON (MNI) - The UK's Office for National Statistics is rewiring its

long-running inflation measures to ensure they remain historically comparable

and valid for calculating indexed payments despite dramatic disruption to

consumption patterns, whilst also working on new parallel data series to capture

changing prices in the time of Covid-19, the ONS's deputy head told MNI.

     With myriad services from haircuts to sit-down restaurant meals no longer

available, the ONS will update its long-running consumer price and retail price

indices by substituting prices for broader categories which include the missing

items, Jonathan Athow, Deputy National Statistician and Director General,

Economic Statistics office, said in an interview.

     CPI and RPI are used for calculating payments including pension, wages and

inflation-linked gilt coupons, so maintaining historical continuity in these

series is crucial, but they were assembled with reference to spending patterns

from two years ago which bear little resemblance to those of lock-down Britain

today.

     --NEW SERIES

     The ONS will also calculate entirely new inflation series, based on

smaller, stripped-down price baskets, to be released in parallel with the

traditional data, to capture the changing cost of living during pandemic

conditions.

     "The key for us is meeting two very distinct needs," Athow said, adding

that a long-running time series should be calculated in a predictable way and

provide as accurate a picture as possible of current inflation but that it was

also necessary to construct a dynamic price measure of goods and services "that

people were able to consume at the moment".

     The next two or three weeks will be "really crucial" in this challenge, he

said, adding that the ONS will publish more detailed guidance on what it has

decided to do in early May and the first time the changes will be applied will

be in the April statistics published on May 20.

     "Only when we see what data we have got and what is available out there

will we be able to find out exactly how we are going to be able to find our way

through it," Athow said.

     Bank of England Monetary Policy Committee members have highlighted the

dilemma the current situation creates for them in their assessments.

     "CPI inflation is not going to be as informative as usual about the balance

of supply and demand in the economy. This is because of the conceptual

challenges that will affect price measurement," MPC member Silvana Tenreyro said

in a recent speech.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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