High-frequency changes in shopping behaviours, promotions and the measurement of inflation: evidence from the Great Lockdown

Xavier Jaravel and Martin O'Connell

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We use real-time scanner data in Great Britain during the COVID-19 pandemic to investigate the drivers of the inflationary spike at the beginning of lockdown and to quantify the impact of high-frequency changes in shopping behaviours and promotions on inflation measurement. Although changes in product-level expenditure shares were unusually high during lockdown, we find that the induced bias in price indices that do not account for expenditure switching is not larger than in prior years. We also document substantial consumer switching towards online shopping and across retailers, but show this was not a key driver of the inflationary spike. In contrast, a reduction in price and quantity promotions was key to driving higher inflation, and lower use of promotions by low-income consumers explains why they experienced moderately lower inflation. Overall, changes in shopping behaviours played only a minor role in driving higher inflation during lockdown; higher prices were the main cause, in particular through a reduced frequency of promotions.

Keywords: Great Lockdown; inflation; Covid-19; coronavirus (search for similar items in EconPapers)
JEL-codes: D12 E31 I30 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2020-11-30
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (4)

Published in Fiscal Studies, 30, November, 2020, 41(3), pp. 733 - 755. ISSN: 0143-5671

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Related works:
Journal Article: High‐Frequency Changes in Shopping Behaviours, Promotions and the Measurement of Inflation: Evidence from the Great Lockdown (2020)
Working Paper: High-frequency changes in shopping behaviours, promotions, and the measurement of inflation: evidence from the Great Lockdown (2020)
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