The Lockdown Weighted inflation CPILW for December 2020

This blog is written by NIESR Fellow Huw Dixon. Any opinions expressed in the paper are those of the author, and do not necessarily reflect the views of the Institute



The CPILW rose slightly from 0.7% in November to 0.8% in December.  The CPIH measure of inflation also increased from 0.6% in November 2020 to 0.8% in December. Both measures indicate an increase in inflation in December.

The gap between the official measure using pre-pandemic expenditure weights and the measure using Lockdown weights has fallen to 0.04% in December from -1.5% in November.  This is the first month for CPIH to exceed CPILW since the pandemic started.


Main Text

The CPILW rose slightly from 0.7% in November to 0.8% in December.  The CPIH measure of inflation also increased from 0.6% in November 2020 to 0.8% in December. Both measures indicate an increase in inflation in December.  However, the increase was more marked for CPIH indicating that the official inflation measure of CPIH is overstating inflation slightly compared to the lockdown weighted measure. However, both inflation levels are close, with the gap between the two being only 0.04%, resulting in the same level in the headline inflation which is reported to one decimal place. This was the first month when CPLW was less than CPIH.

One of the main contributors to the increase in CPIH was the increase in Recreation and Culture (year on year 2.5%, month on month 0.8%). The Lockdown Weight is substantially less than the CPIH weight, so that this increase has a smaller effect on CPILW. The same is also true for rising Transport costs which fed through into CPIH but less so into CPILW.  In previous months, the fall in Clothing and Footwear prices has tended to lead to CPIH being less than CPILW: this factor is still present (Clothing and Footwear fell by 1.7% year on year in December), but less than in November (when the year on year fall was 3.6%), reflecting the slight increase in the level of Clothing and Footwear prices in December.

Food and non-alcoholic Beverages prices have continued to fall:  year on year -1.4% and month on month -0.4%. This affects both CPIH and CPILW.  However, this should be viewed with caution. The ONS price quotes do not include quantity discounts, and there is evidence that multibuy discounts have reduced since the onset of the pandemic.  If we look at the overall price level as measured by the index, the price level for CPIH was the highest ever in December 2020, exceeding the previous peak reached in September 2020. For CPILW the December price index is still slightly below its previous peaks of July and September.


Since April 2020, the CPIH inflation figures have been constructed using the new methodology outlined ONS 2020 for dealing with the effects of the coronavirus. As discussed in Dixon NIESR Blog 8th May, this fails to adequately take into account the changes in expenditure shares during the Lockdown. Dixon (NIESR policy paper 16, April 22nd 2020) proposed a trial statistic CPILW to measure inflation using guesstimates of the Lockdown expenditure weights.  Since then the ONS has published its best estimates of expenditure weights in the second quarter of 2020 (ONS August 2020) and the guesstimates of CPILW were in the main consistent with these.  The comparison with the ONS Q2 and the LW weights are discussed in detail in my Blog of 26th October. The corresponding inflation measure using the ONS Q2 weights is CPIONS.

Below we can see the three measures over the whole period January to December 2020. From March to April, CPIONS is above but close to CPIH. From August to November CPIONS was in between CPIH and CPILW.  In December CPIONS is below the other two measures for the first time, being very slightly lower than CPILW (the difference is only 0.02%).  However, it should be noted that if we consider just headline inflation, reported to one decimal place, all three measures of inflation show inflation at 0.8%.


Changing expenditure shares can increase or decrease measured inflation, depending on how the different inflation rates for each type of expenditure behave.  As time passes, we will see better measures to capture how expenditure is changing with the pandemic and this will help us to interpret the official inflation figures. Clearly, as restrictions have increased across the UK since mid-October, we can expect the Lockdown weights to become more relevant again for the closing months of 2020 and first months of 2021 and better able to capture the underlying inflation.


Further Reading:

ONS Corona Virus and the effect on UK Prices. May 5th 2020.

 Huw Dixon, How can we measure consumer price inflation in a lockdown? Economics Observatory (May 25th 2020).

ONS. Re-weighted consumer prices basket – adjusting for consumption changes during lockdown: July 2020. (August 19th 2020)



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