Bumpy ride ahead for UK on inflation as COVID hits price data
LONDON (UK) – Britain will likely offer some volatile inflation readings in the months ahead because the coronavirus shutdown has prevented statisticians from getting any prices on a wide range of items including pints of draft beer, haircuts and holidays
The Office for National Statistics said it had no data on prices in April that account for about 20% of the weighting of its consumer price index.
The items that are now unmeasurable provided a snapshot of what Britons can no longer do under the governments lockdown – manicures, air fares, tickets to the theatre and concerts, hotel stays and driving test fees.
Those prices would be adjusted in line with overall changes in prices that are available, the ONS said.
A further range of prices for goods and services that were available but only in very limited supply would be adjusted in line with similar items, sectoral indexes or the overall index.
Jonathan Athow, deputy national statistician for economic statistics, said it was too soon to say whether the changes would push inflation up or down.
“There might be some unusual movements, either positive or negative,” he said. “We are going to be in a situation which is likely to be more volatile than normal.”
The ONS also said coronavirus-related changes to the way it calculates the Retail Price Index, which underpins payments on the country’s inflation-linked government bonds, will not require government approval.
The ONS said it had shared its plans with the Bank of England which had determined that the temporary changes did not fundamentally alter the basic RPI calculation and materially hurt index-linked gilt investors.
“As a result, the chancellor’s consent is not required to implement these temporary changes,” the ONS said, referring to British finance minister Rishi Sunak.
(Photos syndicated via Reuters)