CPI falls to 2.5%, RPI falls to 2.9%

michaels

Generali wrote: »

It certainly explains why benefits seem to have gotten more generous over time. I thought, and wrote here, that the price of things people on benefits were more likely to buy must have gone up by less than inflation as a whole. It turns out that index linked benefits have been going up by more than inflation!

Interesting, my perspective (not backed by data) was that the essentials had risen in price by more than the indicies as a whole because of increases in food and energy were being offset by reductions in electronics.

Generali

michaels wrote: »

Interesting, my perspective (not backed by data) was that the essentials had risen in price by more than the indicies as a whole because of increases in food and energy were being offset by reductions in electronics.

That was mine too but this has made me rethink.

FTBFun

Graham_Devon wrote: »

None. I expect.

They will have looked at the link to RPI, and said "hmmm, that sounds like a good investment to me"

You could turn around and suggest anything is a free ride should the anyone change anything for the worse?

NS&I certificates are still a good idea - you get interest at more than RPI, and it's tax free - no other accounts do that and ISA rates are usually quite stingy. My only regret was not applying for more when they were originally issued.

chewmylegoff

and NS&I certificates which were CPI+1% or even +0.5% and tax free would outperform pretty much any savings account on the market.

chewmylegoff

Generali wrote: »

Fair point but the bonds are meant to be linked to changes to the cost of living. If that has been overstated then savers have been getting overstated returns.

i would say that the bonds are meant to be lined to RPI, which is one way of measuring the change in the cost of living, and is based on a transparent formula. whether the fomula accurately reflects the change in the cost of living is another matter. the changes in RPI are what they are - thus the returns have not been overstated at all, they are exactly right.

NS&I could always withdraw the certificates and replace them with CPI versions if they felt that was better. presumably the reason they offer RPI+X certificates is that they see them as a good way of raising money (certainly they are not likely to raise much from the public with their other pitiful offerings which challenge even HSBC in the crap rates stakes), and they are happy to pay the resulting debt-servicing charges.

Graham_Devon

michaels wrote: »

Interesting, my perspective (not backed by data) was that the essentials had risen in price by more than the indicies as a whole because of increases in food and energy were being offset by reductions in electronics.

I've put my foot in my mouth enough times on this forum, so possibly doing it again won't matter.

BUT....agreeing with your point above, isn't the other issue that we spend more per year on the increasing items? (Engery, Petrol, Food etc) than we do on electricals and furniture? I honestly don't think I have bought any large electricals this year, just small electrical gizmo's for my son.

I know I certainly spend more on petrol than I do new sofa's. So while sofa's are decreasing in price, the thing that effects me personally is the increasing price of petrol.

Do the indices allow for this? Or is it just a basket with items (regardless of how we spend on them) providing the weightings? How many people buy new pieces of furniture, new clothes, new electricals each month? And how many buy energy, petrol and food each month?

Fella

Graham_Devon wrote: »

BUT....agreeing with your point above, isn't the other issue that we spend more per year on the increasing items? (Engery, Petrol, Food etc) than we do on electricals and furniture? I honestly don't think I have bought any large electricals this year, just small electrical gizmo's for my son.

I know I certainly spend more on petrol than I do new sofa's. So while sofa's are decreasing in price, the thing that effects me personally is the increasing price of petrol.

The big thing IMO is whether an item is optional or not. When people are skint they'll cut out optional spending & the things that tend to go up by 10% a year or whatever are generally unavoidable. The fact that a DVD player someone can't afford anyway is now a bit cheaper is irrelevant in those circs.

BTW good article on this topic here which sums up what I think about it pretty much:

http://www.cityam.com/latest-news/allister-heath/it-always-dangerous-allow-inflation-figures-be-fiddled

HERE is a rule that never fails: whenever the authorities decide to change the way they measure inflation, reach for your wallet, because you are about to be stealthily robbed. Each revision inevitably discovers that inflation was, in fact, lower than we realised....

HAMISH_MCTAVISH

Fella wrote: »

The big thing IMO is whether an item is optional or not. When people are skint they'll cut out optional spending & the things that tend to go up by 10% a year or whatever are generally unavoidable. The fact that a DVD player someone can't afford anyway is now a bit cheaper is irrelevant in those circs.

So we should set the RPI basket to measure only the consumption pattern of "skint people"?

Or do you think setting it to an average consumption pattern more representative of the average from all people (what we have now) might be a better and fairer way to do it....

Generali

HAMISH_MCTAVISH wrote: »

So we should set the RPI basket to measure only the consumption pattern of "skint people"?

Or do you think setting it to an average consumption pattern more representative of the average from all people (what we have now) might be a better and fairer way to do it....

I think there might be worth creating an RPI for benefits and maybe another for pensioners (pensioners spend disproportionately on services whose price is closely linked to wages).

Of course it will never happen as every time a group gets significantly more or less than RPI the whinging brigade will be out in force.

Fella

HAMISH_MCTAVISH wrote: »

So we should set the RPI basket to measure only the consumption pattern of "skint people"?

Or do you think setting it to an average consumption pattern more representative of the average from all people (what we have now) might be a better and fairer way to do it....

The official inflation rate of 2.x% is a joke. It's kept deliberately low because various things are linked to it & the Government would have no hope of paying for them if it reflected reality. "Personal inflation" calculators have been around for ages & demonstrate this admirably. Not that it needs demonstrating since the vast majority of things people have to spend money on go up by way more than 2.x% a year.

My circustances during say the previous year were essentially identical to say 6 years ago. We eat the same, drive the same, commute the same, etc etc etc. We shop around for the best deals on things like insurance & swap utilities etc fairly regularly. We pay everything (including food & petrol) via DD & in that time the total of our DDs has gone from £1200/month to £1800/month.

Everyone I know has experienced pretty much the same thing. Regardless of how many clever formulas (which conveniently ignore lots of things) people try to use to demonstrate that inflation is low actually it is high.