Updated CSO inflation index reveals Irish households' changing tastes

What do air fryers, gin and disposable vapes have in common?

Well, they're all items which the Central Statistics Office (CSO) now thinks are important enough to be used to help measure Ireland's consumer price index or general rate of inflation.

Earlier in the month the CSO outlined what goods and services it was now monitoring, and which it wasn't, and it provides a fascinating look at Irish household's changing tastes and habits over time.

But first...

What is the CPI?

The consumer price index (CPI) is the official measure of inflation in Ireland. 

The index contains a representative ‘basket’ of over 600 items that are commonly bought by Irish households. 

The items in the index are chosen based on the results of the CSO’s regular Household Budget Survey which asks households what they're spending their money on. 

The price of all the goods and services in the index are monitored by the CSO’s team of researchers to gauge whether prices are increasing or decreasing and by how much. Most prices are collected monthly, through personal visits into shops as well as manual online searches and direct communications with large retailers, while some prices are collated quarterly or annually.  

However the basket of goods and services needs to be regularly updated to ensure that it properly reflects what Irish consumers are now buying.

For example things such as gym membership, a Netflix subscription, a Spotify subscription or oat milk would all be common purchases for Irish consumers today but would have been less common, or in some cases non-existent, a decade ago.     

Similarly, items such as camera film, cassette tapes, and DVD players would once have been common purchases but are now rarely bought, if at all.   

The basket of goods and services was last updated in 2015 and was due to be updated again in 2021. However Covid put a stop to that. So this is the first time in eight years that the items in the basket have changed.  

So what’s gone out and what’s gone in? And would you agree with the changes?

Let’s take a look…

Changing tatses

Irish consumers' changing tastes are evident in what’s been added and what’s been removed from the basket of goods and services.

Items that have been added to the basket include disposable vapes, air fryers and gin. 

Technological changes are also evident with the inclusion of smart watches and wireless headphones. 

And changing dietary habits are also recognised with the inclusion of milk and meat substitutes, spring onions, and non-alcoholic beer. 

Items on the way out include phone landlines, swiss roles, and digital cameras. While perhaps somewhat controversially, the cost of entrances to night clubs is no longer deemed worthy of inclusion. A sure sign of the changing nature of younger people's social habits.

The cost of rail catering has also been removed - perhaps unsurprisingly as it hasn’t been available on most Irish Rail services for the past four years! 

Weighting changes      

As well as changing the items in the basket of goods and services, the CSO also regularly changes their weighting. 

The weighting of items reflects their relative importance to one other. The larger the weight of an item in the basket, the greater the impact that the item will have on the overall rate of inflation. 

Weighting is important as a 10% increase in the cost of a Netflix subscription is not going to have the same impact on a household’s budget as a 10% increase in the cost of electricity or health insurance for example. 

The weighting on spending in restaurants, cafes and on fast food has increased. As has the weighting on gas and electricity. 

But the weighting for pubs has fallen. Also down is the weighting placed on rent.

This doesn’t mean consumer spending on these items has fallen, the CSO says, but rather that as a percentage of overall household expenditure it has decreasd.

No one size fits all

Do you vape? Do you like a nice gin and tonic on a sunny day? Do you drink oat milk? And do you use a smart watch?

If the answer to all these questions is no, you might wonder if the CPI is relevant to you.

The fact is no one measure of inflation is perfect as everyone's shopping habits are different.   

Different income households will also have different inflation rates. A lower-income household will spend a bigger proportion of its money on food and heating for example, meaning a 10% increase in food prices will affect them disproportionately more compared to higher-income households.

While those who are mortgage free will have been much less impacted by rising interest rates in recent months than those on a tracker. 

There is no perfect one-size-fits-all inflation metric but the CSO CPI figures are the best stab we have at estimating the rate of price growth.  

What do you think might get added or removed from the CPI basket over the coming years?