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CEP Covid-19 analysis
Prices and inflation in a pandemic - a micro data approach
Richard Davies
February 2021
Paper No' CEPCOVID-19-017:
Full Paper (pdf)

Tags: covid-19; inflation; firm size; price changes

The Covid-19 lockdowns and recession are the most exceptional economic events in living memory and will impact the economy for years to come. One vital channel is via price changes. Price rises and cuts alter real wages, influencing consumer spending power. They have knock-on effects, via the official consumer price index (CPI) on regulated payments and costs including pensions, inflation-protected bonds and utilities. The degree of price flexibility in an economy also influences the impact of monetary policy. The way prices are evolving is thus a vital question in understanding the economic impact of pandemic. While some Covid-19 related questions will take years to answer, the availability of ‘micro’ data for the UK means that the impact on prices is something we can track in close to real time. The price data used in this briefing come from monthly records collected and published by the Office for National Statistics (ONS). The monthly ‘price quote’ files track the item sold, the shop selling it, and the UK region in which it is located. Data are available between February 1988 and December 2020. The final clean dataset contains 36m observations.