Netflix thrown into inflation basket by ONS

The price of downloading films from the internet will now be taken into account by the Office for National Statistics when it calculates the monthly rate of inflation.

The ONS yesterday announced that the charges of video streaming services such as Netflix will be included in the "basket" of 699 goods and services that the statistics agency uses to compare relative price changes across the economy.

In a reflection of how technological change is altering our spending habits, the ONS is dropping DVD recorders from the measure of Consumer Prices inflation. Interchangeable lens digital compact cameras are included. Last year the ONS added e-books to the basket.

Other technologies seemed to fall out of favour this year. The ONS removed automatic car washes from the basket and included manual car washes. It also said that digital compact cameras are losing market share because people can take better-quality photos on mobile phones.

Other additions to the basket, reflecting evolving tastes and fashions, included flavoured milk and canvas shoes. Hardwood flooring has been removed, replaced by a tufted carpet of manmade fibres. In total there were 14 additions to the basket and nine fell out.

Food and non-alcoholic beverages will make up 11 per cent of the basket. Transport accounts for 15 per cent. Recreation and culture takes up 14 per cent and 12 per cent respectively. The ONS noted that household fuels now account for a much larger proportion of people's living costs than they did a decade ago, underlining the squeeze on living standards from rising energy costs.

Annual Consumer Price inflation fell to 1.9 per cent in January, the first time it has dipped below the Bank of England's 2 per cent target in four years. Inflation fell to 1.1 per cent during the 2008/09 recession, but soared in the following years, peaking at over 5.2 per cent in September 2011. The ONS said that housing, water, electricity and fuel costs had made the largest contribution to rising prices over the past 27 months.