Inflation

The Bank of England have a target inflation rate of 2% of the consumer price index. This is primarily controlled by the Bank of England Base Rate. If inflation starts to rise then the base rate increases to discourage borrowing which in turn discourages spending causing retailers, wholesalers and amnufaturers to curb costs.

Inflation is measured by comparing a basket of goods year on year, was is in the basket stays mainly the same although new items sometimes replace old items such as the MP3 player replacing the CD player and the DVD player replacing the VHS player.

Below is an article from the BBC Web site that gives more examples:

Garden strimmers are out and champagne is in. This year's typical "shopping basket" of goods provides a snapshot of changing consumer trends.

How much did that mangle cost you? The prices are getting ridiculous.

Maybe that's not a conversation that you're likely to hear at your local retail barn. But in the 1950s, when clothes were given a weekly handwash, the mangle was significant enough to be included in the "shopping basket" of goods used to calculate the inflation rate.

This list of common purchases, currently containing about 650 goods and services, is drawn up by the Office for National Statistics, and is designed to be a representative sample of current spending patterns.

As such, it's a snapshot of high street trends - which records 120,000 prices each month.

Champagne and pensions

So this year, it's goodbye coleslaw and slippers and into the basket for champagne and flat-panel televisions.

ITEMS ADDED IN THE 1950s
Canned fruit
Tupperware
NHS charges
Televisions
Camera film

Also on the guest list are personal music player and digital camcorders - but there's no more room for muesli or multipacks of orange juice.

This isn't a frivolous exercise, as the prices of these chosen goods are used for two key economic measures - the consumer prices index (CPI) and the retail prices index (RPI).

The first of these, the CPI, is used by the Bank of England for its inflation target - which will feed into its decisions about interest rates and how much we pay for mortgages.

Strimmer struck off

And the second, the RPI, is used for setting the amount paid in pensions and state benefits. So the decision to include nannies' fees this year, rather than frozen gateaux, will have a bearing on how much millions of people receive each week.

ITEMS ADDED IN THE 1970s
Yoghurt
Wine
Duvets
Cassette recorder
Record player

This shopping basket is also an indicator of changing fashions. Back in the 1940s, a new addition was "electricity".

In 2006, the garden strimmer has now been put out to grass, along with the "casual shirt", baseball cap and frozen boneless chicken thighs.

And types of furniture have been chucked out as scrap. Bedside cabinets and dining room tables are no longer considered sufficiently typical to be included.

But this year, the "home office desk" has been included, presumably reflecting the numbers of people now working from home.

Statistical nuggets

Perhaps bucking the trend, or indicating a 1970s retro comeback, an addition to the 2006 shopping basket is chicken Kiev. This tasty meal joins last year's newcomer, chicken nuggets. While going back on the shelf are sliced salami and flavoured milk.

ITEMS ADDED IN THE 1990s
Camcorders
Replica football shirts
Chinos
Multi-vitamins
Computer games

The changes in taste can also be quite subtle. While champagne has gone from being a special occasion drink to a supermarket staple, this latest list shows that the bubbles have gone flat for "imported sparkling wine", which no longer gets a place in the basket.

In the gadget section, MP3 players make their first appearance - but on the way out is the personal CD player.

And showing that we still know how to have a good time, among the new arrivals are "exhaust fitting in fast-fit auto centres" and the "in-store cafeteria meal". Maybe with a chicken Kiev.

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Here are some reader comments.

It's notable they've still not included things most people buy regularly that are still rocketing in price - Gas, Electricity and Petrol.
Tom Marshall, Cardiff

I smell a rat! By adding new items to the basket - items that will inevitably fall in price like MP3 players - surely the true inflation figure is never revealed? Like it is meant to be 2% at the moment but it doesn't feel like 2% when I buy my train ticket, turn on a light, put on the heating, fill up my car, go for a drink and so on.
Peter, Birmingham

At the risk of appearing cynical, I would say that things are added to the list which will bring the inflation rate down. Personal music players and digital camcorders are items which cost significantly less than they did this time last year, bringing both indices down. Interest rates and mortgage payment are not included, because these would push the rates up. As an experiment, I purchased the same trolley load of shopping at about the same tine every year: the increase in price each year was around 5%.
Alan, London UK