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The ‘shopping baskets’ of items used in compiling the various measures of consumer price inflation are reviewed each year. Some items are taken out of the baskets and some are brought in to make sure the measures are up-to-date and representative of consumer spending patterns.
The Office for National Statistics (ONS) calculates inflation by monitoring monthly changes to the cost of an array of goods and services from pricing points across the UK, from online retailers and over the telephone. The baskets are designed to represent spending habits and reflect changes in consumer behaviour. Last year, craft gins and self-tanning products were added. The changes for 2021 have just been announced by the ONS; 17 items added, 10 removed and 729 left unchanged.
Additions to the baskets for 2021 include electric and hybrid cars, hand hygiene gel, men’s loungewear bottoms, women’s sweatshirts, hand weights, multi-chocolate sweets and smartwatches. Removals from the baskets include staff restaurant sandwiches, gold chains, Axminster carpets and white chocolate. The changes are all indicative of how spending habits have changed in Britain during a year of lockdown.
In a snapshot of a country learning to live with Covid-19, the ONS reported a surge in spending on products designed to keep us safe and fit. As so many people have worked from home and we’ve had little opportunity to get dressed up for a big night out, suits and partywear have stayed in the wardrobe and been replaced by loungewear such as tracksuit bottoms and sweatshirts. Dumbbells and smart watches tracking exercise are now in the basket as we’ve not been able to go to the gym and the new status of hand gel needs no explanation!
Staff restaurant sandwiches have taken a big hit and Axminster carpets have made an exit as they’re associated more with commercial property than residential. What’s happened to the Milkybar kid? The ONS explained that white chocolate is a low-weighted item that has poor coverage in terms of the number of price quotes collected each month, so has been removed from the basket.
There’s been a big move towards hybrid and electric cars in the last year and with sales of new petrol and diesel cars due to be banned in 2030, this migration will keep gaining momentum. The shift in sales of new cars away from petrol and diesel models has meant that hybrid and electric cars are included in the basket. Transport Minister Rachel Maclean has said ‘we want as many people as possible to be able to make the switch to electric vehicles as we look to reduce our carbon emissions, strive towards our net-zero ambitions and level up right across the UK’.
The grant scheme for electric vehicles has just been updated so the funding will go further, last longer and be available to more drivers, helping people to make the switch. The government will provide grants of up to £2,500 for electric vehicles priced under £35,000. Grants won’t be available for higher-priced vehicles, the school of thought being that those who can afford to buy a Tesla are able to switch to electric without a subsidy from taxpayers. Changes to the grant scheme and the savings glut will no doubt see sales of electric vehicles soar in 2021. Will the car manufacturers be able to keep up? Will there be enough resource? And what will the implications be?
Upward momentum in commodity prices makes items more desirable. In 2014, rhodium was worth $750/ounce but is now valued at a staggering $20,000/ounce., It’s a by-product of platinum used in catalytic converters and is particularly prominent in hybrid vehicles. The result of this is a surge in thefts of catalytic converters from hybrid cars all over the world. In the UK, teams of thieves are targeting Toyota, Honda and Lexus vehicles and brazenly removing the converter. Hybrid cars are the preferred target because the metals are less corroded. Crooked scrap merchants will pay around £450 for a converter so thieves are raking it in.
Hybrid cars were already in the spotlight in 2019 with police figures indicating 13,000 catalytic converters were recorded as stolen compared to 2,000 the previous year and with the metal found in car exhausts now worth much more than gold, thieves won’t be ditching their unscrupulous plans anytime soon. The effect – car manufacturers can’t make the parts fast enough to cope with the demand because so many are being stolen.
How will manufacturers cope with the surge in demand as drivers make the inevitable shift to electric and criminals ramp up their operation with an ever-increasing gem pool? Is there an alternative to rhodium that’s less valuable and not as enticing to thieves? Something needs to change, but until that happens, you may want to consider some serious security for your electric vehicle!
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