Tablets reduce inflation

The Office for National Statistics (ONS) announced today that tablets such as the iPad and Samsung’s Galaxy are to be included in both the Retail Price Index (RPI) and the more favoured Consumer Price index (CPI).

The iPad 2 has had a price reduction of £70 in March ie approximately 17.5% so this will be reflected in the March Indices. Further significant reductions in this element of the index could also occur if amazon and Barnes & Noble were to introduce the Kindle Fire & Nook in the UK. Unfortunately, following a discussion with the ONS, it appears, from the way the statistics are compiled, that these latter two could only impact the statistics from 2013!

That’s the good news – now the not quite such good news!

Tablets are included (within the CPI index) in the Data Processing Equipment section (9.1.3) which is a subsection within the Audio-Visual Equipment and Related Products group (9.1) which is one of six such groups forming part of the Recreation and Culture (9) {R&C} category of the overall index with its 12 categories! This R&C category has an overall weighting in terms of the index of 13.4% and is the third highest. (The other 4, in the top 5 which represent exactly 2/3 of the total, are Transport {16.4%} Housing & household  services {14.4%} Restaurants & hotels {11.4%} and Food and non-alcoholic beverages {11.2%}).

Now hopefully you are keeping up! If so you will now, undoubtedly, want to know what proportion tablets represent of the total index? The answer, we are afraid, is between 0.02% and 0.03%!

Whilst that is disappointing in terms of the potential impact on inflation we think, following a little further research, that it is probably not wholly unrealistic.

Click to enlarge

ASDA (yes really!), we discovered, publish a rather useful monthly Income Tracker  with the help of the CEBR . It comes up with, amongst many other useful pieces of information a net weekly income per household figure which for January this year was £574. So annually this comes to £29,848. This means that the average household spends between £5.97 and £8.95 per week on buying a tablet. So our calculations imply that currently between 1 in every 45 to 67 households per year are buying a £399 tablet ish!

We did try to ascertain from the ONS if they effectively used, or had, an average tablet price but apart from ascertaining that there were 10’s in their sample we failed!

Very approximately, with some extrapolation,  we estimate there are currently about 27 million households in the UK so that works out to about 400,000 – 600,000 tablets to be purchased in the year. This seems a bit on the low side to us, particularly in the light of Kantor’s British findings

For those of you who want to delve further into the ONS Indices here’s their pdf on the latest changes.

Incidentally one of the other additions is the “Bundled communication packages” for telephone television and internet packages which seems to make a lot of sense. Our ONS friends also inform us that Apps are already included – somewhere!

Update 2.30pm The ONS have tweeted a nice little infographic summarising the changes in the CPI index

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