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

Xavier Jaravel and Martin O'Connell

No W20/33, IFS Working Papers from Institute for Fiscal Studies

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.

Date: 2020-10-05
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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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