CPI Up to 3.7% RPI Up to 4.8%

Really2

Interestingly on the news at 10 last night it said CPI with tax increases stripped out was at 2%.
Seemed low to me but then I looked.

The Institute of Directors meanwhile emphasised the fact that annual CPIY inflation, a measure which excludes the impact of indirect taxes such as value-added tax, was at 2% in December. Although up from 1.6% in November, this measure in December matched the target set for overall CPI.

Annual CPIY inflation in December excludes the impact of the increase in VAT from the emergency recession rate of 15% to 17.5% in January 2010.

If people think this is always lower then normal CPI, think again here is a graph not compleatly up to date but you can see how closes it matches until tax tampering started.


Looks like we are fighting tax.

Graham_Devon

Really2 wrote: »

Interestingly on the news at 10 last night it said CPI with tax increases stripped out was at 2%.
Seemed low to me but then I looked.

And as the other economic bloke, and Stephanie Flanders stated form the BBC, it's a very simplistic way of looking at it.

The full VAT rise doesn't always get passed on to the consumer. Therefore you cannot simply strip the full VAT rise out of CPI and say "oh look, that looks better".

DervProf

I heard George Osbourne say on last night's news that the government fully support the BoE in their fight against inflation. "Fight" ? Either the BoE are taking a battering, or they've legged it.

Maybe George is hinting that IRs will increase soon.

HAMISH_MCTAVISH

Really2 wrote: »

Interestingly on the news at 10 last night it said CPI with tax increases stripped out was at 2%.
Seemed low to me but then I looked.


If people think this is always lower then normal CPI, think again here is a graph not compleatly up to date but you can see how closes it matches until tax tampering started.


Looks like we are fighting tax.

Excellent post, and absolutely correct.

When you raise the cost of goods through raising taxes, inflation increases. Hardly a surprise then, that the CPI-Y measure which excludes tax increases shows inflation at 2%.

If the government want inflation to drop to 2%, then they should reverse the tax rises.

Graham_Devon

Sigh.

Seems this was completely ignored...

“It has recently become fashionable to quote the tax-adjusted inflation measures, CPI-CT and CPIY, which are running well below headline inflation, at 1.9% and 2.0% respectively (up from 1.5% and 1.6% in November.) CPI-CT is calculated at constant tax rates while CPIY excludes indirect taxes altogether.

“These measures, however, understate "true" inflation because they are calculated on the assumption that indirect tax hikes are passed on in full to consumers. ONS research on the December 2008 VAT reduction from 17.5% to 15% indicated pass-through of only one-third. Assuming that one-half of the increase in VAT and other indirect taxes last year was reflected in the prices charged to consumers, inflation would now be about 2.8% had tax rates remained stable.

Anyone would think the housing optimists are scared of inflation and interest rates.

Really2

Graham_Devon wrote: »

The full VAT rise doesn't always get passed on to the consumer. Therefore you cannot simply strip the full VAT rise out of CPI and say "oh look, that looks better".

I think we may be fairly safe to assume it was on Fuel and food though. The two main contributors.

So you think the best method is look at the tax and go "aaagh we are miles over target" knowing full well the majority of why we are is down to tax.

I van assure you the customer does pay the full vat rise (it is illegal not to);)
What retailer had not applied Jan 2010 VAT rise? this is Dec 2010 we are talking about?

Some retailers put up prices before a rise in VAT? what do we do then?
go "Oh look, That looks worse"

Really2

Graham_Devon wrote: »

Sigh.

Seems this was completely ignored...



Anyone would think the housing optimists are scared of inflation and interest rates.

You do realise your article says had tax not been messed with they expect inflation to be 2.8% (in their opinion nearly 1% lower?)

inflation would now be about 2.8% had tax rates remained stable.

But have they got any data relating to the VAT rise not Fall,
Lets think
Fall in VAT = charge same = make more money
Rise in VAT = Charge same = Make Less Money

Which would a shop be more likely to implement?


Anyone with debt would want inflation graham, but I won't go over that again if it never sinks in.

HAMISH_MCTAVISH

And if inflation was 2.8% (as they claim if the VAT rise hadn't happened) then this would be a total non-story.

ILW

HAMISH_MCTAVISH wrote: »

And if inflation was 2.8% (as they claim if the VAT rise hadn't happened) then this would be a total non-story.

I am probably missing something, but I thought these figures were from december, before the VAT increase.

Really2

ILW wrote: »

I am probably missing something, but I thought these figures were from december, before the VAT increase.

Vat increased Jan 2010 2.5% that effected the whole of 2010 figures. Also the Figures were on the back drop of a 2.5% lowing of VAT against Dec 2009 figures.
Just like the 2011 VAT increase will effect all of 2011 figures.

2012 should see inflation rate dip sharply as one off factors are removed all together (providing they dont put VAT up again )