MSE News: Inflation in surprise fall but prices still rising sharply

masonic

Ark_Welder wrote: »

Negative inflation is deflation, i.e. prices are lower than a year before. Falling inflation is known as disinflation, i.e. prices are still rising on an annual basis, but by a lower rate than previously

[edit] Precise meaning of the word 'deflation'? Discuss!!

If only you'd replaced the word 'falling' with 'slowing', I'd have said that's a perfect answer.

Edit: I guess an analogy could be formed with a tennis ball you throw up into the air. It's velocity gradually decreases, so it is slowing (disinflation), then it's velocity becomes negative and it is falling (deflation).

Ark_Welder

Slowing inflation, falling rate of inflation.....?

I think I might have been typed-out from elsewhere.....

ManAtHome

Masomnia wrote: »

The CPI-CT index they produce, which assumes that all taxes stayed constant, showed a 2.6% increase. Comfortably on target.

Comfortably 30% over target (which is 2% with 1% either way 'wiggle room', not "something over 2% most of the time").

Anyway, wasn't CPI supposed to be around 1.4% round about now (May 2010 "forecast")**, so even CPI-CT is well over forecast.

Supplementary - does CPI-CT include all taxes (ie the £200 reduction due to tax allowance increase - levels out against VAT if you spend more than £9k a year on standard-rated shiny stuff).

**when you keep getting it wrong, just keep sliding it forward... http://www.bbc.co.uk/news/business-14085513

grasslands

Corporation Tax Increases Inflation Because Consumers Pay this Tax Ultimately

https://forums.moneysavingexpert.com/discussion/3351890

gozomark

masonic wrote: »

I can't agree that "inflation" means the same thing as "rate of change of inflation".

neither can I, and thats not what I said:-)

masonic

gozomark wrote: »

neither can I, and thats not what I said:-)

Ok, I can see that's not what you were saying. It's just that the terms "inflation" and "inflation rate" are being used interchangeably in several of the posts here when really they shouldn't be.

The media seem to have collectively decided this month to cook up the term "falling inflation", which is nonsense, to create a sensationalist concept to grab peoples attention - 'inflation is falling, but prices are still rising'. There would be no need to remind people that prices were still rising, as if it is some sort of contradiction, if they used the term "slowing inflation" or a "falling rate of inflation". It's all very Daily Mail.

CLAPTON

Inflation refers to the general price level; that is the cost of a 'basket' of goods and services

if the cost of that basket goes up we say there is inflation

the the cost decreases we say there is deflation

the price level is measure by various indices e.g RPI and CPI

so in May the RPI stood at 235.2 and in June it also stood at 235.2 so there was no general increase in prices from May to June

now for lots of reasons people like also to talk about the rolling 12 month percentage CHANGE in the indices i.e the 'inflation rate'
so in May the rolling 12 month percentage change in the level of prices was 5.2%
and in June the rolling 12 month percentage change was 'only' 5%

depending upon your point of view and circumstances we may or may not be pleased that the level of prices didn't change from May to June and/or you may or may not be pleased that the rolling average decreased from May to June

Governments tend to like talking about the annual change so they don't need to remind people how their saving are being eroded over the longer term so e.g. a £1000 in january 2087 (RPI was 100) is now only worth 1000 x 100/ 235.2 = £425 ; so inflation is a very handy way of reducing government debt


on the other hand if your income is linked to the rate of inflation then it may suit your circumstances to welcome the rise in inflation

le_loup

CLAPTON wrote: »

on the other hand if your income is linked to the rate of inflation then it may suit your circumstances to welcome the rise in inflation

Hardly!
Inflation 5%
Wage increase 5%
No change in purchasing power.
Inflation 2%
Wage increase 2%
No change in purchasing power.

CLAPTON

le_loup wrote: »

Hardly!
Inflation 5%
Wage increase 5%
No change in purchasing power.
Inflation 2%
Wage increase 2%
No change in purchasing power.

on aggregate that may be so, but I specifically said depending upon 'your circumstances'

in general if you have a lot of debt (i.e. mortgage ) then increased income and increased inflation are generally welcome
if you depend upon saving interest or your income isn't rising in line with inflation then increased inflation is generally unwelcome

PaulChelt

Stompa wrote: »

Over what period though.....?

This time last year I was spending £25-30 a week. Now I am lucky to get £40.