Calculating Monthly Inflation

JayBrun

I can't find a more suitable forum so here goes.

I use the figures provided by HMG to determine the effect of inflation over a 12 month period.
I'm having difficulty doing the same same thing on a monthly basis.

By way of example I use RPIX which for the year ended Dec 2010 was 4.8% and can easily calculate how much inflation has 'cost' me in that year.

RPIX for Jan 2011, for the previous 12 months was 5.1 %.
The equivalent figure for Dec 2010 was 4.7%.

How can I determine how much inflation cost me during the month of January bearing in mind the 5.1% is for the previous 12 months and the obvious comparison would be inflation for the 12 months ending Dec 2010.

A simpler way of looking at this - say I had £1000 at the end of Dec 2010, what is it worth at the end of Jan 2011 using RPIX as the basic criteria.

Are there any figures indicating the actual change in inflation for a given month compared with the previous month.
There are figures for RPI using Jan 2007 indexed to 100 but I've no idea if they would help me or if so how to use them.

Any advice appreciated - maths was never my strong point.

pressuredrop_2

http://www.statistics.gov.uk/downloads/theme_economy/rp02.pdf

Annual: Difference 229.0 217.9

Monthly: Difference 229.0 228.4

DavidHayton

pressuredrop wrote: »

http://www.statistics.gov.uk/downloads/theme_economy/rp02.pdf

Annual: Difference 229.0 217.9

Monthly: Difference 229.0 228.4

You need to divide the first figure by the second figure to get the percentage increase.

Hence Annual = 229.0 / 217.9 = 1.051 (i.e. +5.1%)
Monthly = 229.0 / 228.4 = 1.003 (i.e. +0.3%)

These figures are from table RP02 which is RPI

If you want RPIX you need table RP05:
http://www.statistics.gov.uk/downloads/theme_economy/RPIX.pdf

Best wishes
David

JayBrun

Thanks pressuredrop.

@DavidHayton - you're getting me in the right direction - thank you.

I'm still struggling a little so - at the risk of being a pain:
I have a spreadsheet keeping track of how well, or otherwise, investments/savings are doing and want to take the effect of inflation into account each month rather than guess or wait until the end of the year to find out how bad things really are.

Using 0.3% as the increase in inflation for the month how can I use that to determine the value - after inflation - bearing in mind RPIX is running at 5.1% for the previous 12 months as of the end January ie a nominal 0.425% per month and increasing.

In the notional example of say £1000 at the end of Dec what reduction/calculation should I apply to determine the value at the end of Jan.

Apologies but i did say maths was not my forte

pressuredrop_2

0.3% inflation

1000 / 100.3 x 100 = Less.

JayBrun

With inflation increasing to 5.1% I assumed using 0.3% for the month would not be correct since for 12 months this doesn't seem to get close to 5.1%.

I can only assume that although inflation has increased for the 12 months ended January, the increase in January was relatively low compared to the increase in December - on checking that seems to be the case.

Thank you.

I did assume that 'Less' would come into it somewhere.

pqrdef

0.3% was bad for January. The Dec-Jan increase was negative in each of the previous three years.

Linton

JayBrun wrote: »

Thanks pressuredrop.

@DavidHayton - you're getting me in the right direction - thank you.

I'm still struggling a little so - at the risk of being a pain:
I have a spreadsheet keeping track of how well, or otherwise, investments/savings are doing and want to take the effect of inflation into account each month rather than guess or wait until the end of the year to find out how bad things really are.

Using 0.3% as the increase in inflation for the month how can I use that to determine the value - after inflation - bearing in mind RPIX is running at 5.1% for the previous 12 months as of the end January ie a nominal 0.425% per month and increasing.

In the notional example of say £1000 at the end of Dec what reduction/calculation should I apply to determine the value at the end of Jan.

Apologies but i did say maths was not my forte

I suggest you dont work from the headline % numbers. These are a dumbed down annual change in the CPI/RPI/RPIX. You need the actual Index value, which defines the current cost of living as opposed to any change. You can then easily work out the % increase.

You get the actual index value (for RPI) from:

http://www.statistics.gov.uk/downloads/theme_economy/rp02.pdf

So for December 2010 the RPI value is:228.4
For January 2011: 229.0

So the % increase over the month is ((229.0-228.4)/228.4) * 100 = 0.26%

Note that the shock-horror headline "rise in inflation" was actually due to a drop in RPI in Jan 2010 which made the annual difference larger. Nothing special happened recently.

PS you can get the equivalent RPIX values from:http://www.statistics.gov.uk/downloads/theme_economy/Rpix.pdf

xrjtg

You seem to understand the basic idea of the inflation calculations: they work out the value of a basket of shopping, and this is (proportional to) the published value of the index. You want to know the value of your investments in "baskets of shopping", so just divide by the the current index value. To get an answer in pounds again you need to multiply by the cost of a basket of shopping (the index) at the time you choose as your base point.

I'd suggest you don't try and implement your inflation-tracking by fiddling the monthly growth rates for your investments; just apply the above rescaling to your grand total figure.

JayBrun

xrjtg - I'm following your advice and have covered the period back to March 2004, for which I have detailed figures, to keep track on a monthly basis.

With advancing years I seem less inclined to spend - I gave up on Retail Therapy years ago.
The ongoing losses due to inflation are rather scary but I don't spend all of my income and I have some some shares, which can help at times.
Over the period my cash and shares have increased by 34.5 % so I'm still beating inflation - I think.
My aim henceforth is simply to protect what I have.

If 5% inflation continues or gets worse for any length of time I will have to start thinking hard or become even more philosophical

Thanks guys for helping me out on this.