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RPI published today?
Comments
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Probably nothing...the official calculation doesn't fit in with the general publics way of seeing things...
People see basic daily cost going up...even the BoE admit this...the basket of items used for the calculation needs to be questioned...that I doubt will happen..
most of us only remember the things that go up and forget about things that don't change or become cheaper.
one needs to look at your total yearly spending to make a real comparison0 -
Probably nothing...the official calculation doesn't fit in with the general publics way of seeing things...
People see basic daily cost going up...even the BoE admit this...the basket of items used for the calculation needs to be questioned...that I doubt will happen..
Probably because no single member of the general public is "average". Also, it's human nature to think of, and dwell upon, something you know to have gone up 10%, while forgetting that your new tyres, or car parking haven't gone up for 2 years....
My understanding is that ONS are pretty good at adjusting the basket - rightly or wrongly. Imagine that only food and petrol went up, but (a) we all switched to generic brands enough to keep food costs the same, and (b) we all drove fewer miles, then [according to my understading] that month's inflation would show up as 0.0%.
Personally, I'm a bit suspicious of this approach since it's a bit misleading. You see my own behaviour (and of many others I expect) would be that if, say, everything went up 10% across the board, while income was constant, then I would probably cut out a holiday. My expenditure would therefore 0% higher than the previous year. Take this forward to the whole population, then I'd rather believe inflation was 10% rather than 0%.0 -
most of us only remember the things that go up and forget about things that don't change or become cheaper.
one needs to look at your total yearly spending to make a real comparison
Surprisingly it only the things that you really need that tend to go up and up whilst all the stuff you can do without or buy infrequently tend to remain static or fall.
Elasticity of Demand."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Loughton_Monkey wrote: »Probably because no single member of the general public is "average". Also, it's human nature to think of, and dwell upon, something you know to have gone up 10%, while forgetting that your new tyres, or car parking haven't gone up for 2 years....
My understanding is that ONS are pretty good at adjusting the basket - rightly or wrongly. Imagine that only food and petrol went up, but (a) we all switched to generic brands enough to keep food costs the same, and (b) we all drove fewer miles, then [according to my understading] that month's inflation would show up as 0.0%.
Personally, I'm a bit suspicious of this approach since it's a bit misleading. You see my own behaviour (and of many others I expect) would be that if, say, everything went up 10% across the board, while income was constant, then I would probably cjut out a holiday. My expenditure would therefore 0% higher than the previous year. Take this forward to the whole population, then I'd rather believe inflation was 10% rather than 0%.
Suppose the price of petrol stayed the same but the price of computer games fell so you switched from going out for a drive to staying in playing games as a leisure activity. Wouldn't it make sense to use what you buy now as your 'basket' rather than what you bought last year?I think....0 -
grizzly1911 wrote: »Surprisingly it only the things that you really need that tend to go up and up whilst all the stuff you can do without or buy infrequently tend to remain static or fall.
Elasticity of Demand.
the issue isn't about what you 'need', it's about what you actually buy.0 -
Loughton_Monkey wrote: »Probably because no single member of the general public is "average". Also, it's human nature to think of, and dwell upon, something you know to have gone up 10%, while forgetting that your new tyres, or car parking haven't gone up for 2 years....
My understanding is that ONS are pretty good at adjusting the basket - rightly or wrongly. Imagine that only food and petrol went up, but (a) we all switched to generic brands enough to keep food costs the same, and (b) we all drove fewer miles, then [according to my understading] that month's inflation would show up as 0.0%.
Personally, I'm a bit suspicious of this approach since it's a bit misleading. You see my own behaviour (and of many others I expect) would be that if, say, everything went up 10% across the board, while income was constant, then I would probably cut out a holiday. My expenditure would therefore 0% higher than the previous year. Take this forward to the whole population, then I'd rather believe inflation was 10% rather than 0%.
I would have thought that the change in consumer spending would only become apparent some time after the change in prices so the RPI would show an increase in prices whilst the actual costs to the public may not have changed.
Assume that the only things in the RPI basket were apples and oranges each at £1 for 5. People normally buy 5 of each. Now if apples doubled in price and oranges halved what is the inflation? RPI presumably would say that the index has risen in line with the total cost of the 10 fruit, a 25% increase. CPI being a geometric mean presumably would say that prices havent risen: SQRT(2 * 0.5) = 1.
Now people could switch entirely to oranges so that the cost of 10 fruits reduces from the original £2 to £1. Perhaps prices have really fallen.
My experience based on detailed records of my own expenditure is that the RPI value is a fairly large over estimate of the real situation. This may be nice for people on RPI linked income, however if my analysis is correct it does actually increase inflation as spending power is raised without any increase in production.0 -
the issue isn't about what you 'need', it's about what you actually buy.
The problems stare when you can't afford to buy the things you need to survive. Water, Food, Warmth, Shelter. Cheaper 54" plasma screens are irrelevant."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
So this is only relevant if you can choose between alternatives. If you can't choose then RPI is understating the position. If you are on RPI linked fixed incomes (with no slack) then you are going to be hit hardest.I would have thought that the change in consumer spending would only become apparent some time after the change in prices so the RPI would show an increase in prices whilst the actual costs to the public may not have changed.
Assume that the only things in the RPI basket were apples and oranges each at £1 for 5. People normally buy 5 of each. Now if apples doubled in price and oranges halved what is the inflation? RPI presumably would say that the index has risen in line with the total cost of the 10 fruit, a 25% increase. CPI being a geometric mean presumably would say that prices havent risen: SQRT(2 * 0.5) = 1.
Now people could switch entirely to oranges so that the cost of 10 fruits reduces from the original £2 to £1. Perhaps prices have really fallen.
My experience based on detailed records of my own expenditure is that the RPI value is a fairly large over estimate of the real situation. This may be nice for people on RPI linked income, however if my analysis is correct it does actually increase inflation as spending power is raised without any increase in production."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Bad news for the boe policy of inflating away the debt overhang
I don't think it's the BOE's choice as such. More likely the Treasury's and it consequently applying subtle and not so subtle pressure on the BOE and the MPC to the effect that it would be "irresponsible" not to cooperate with getting out of recession as the priority. However, as we see, even with 0.5% base rate recession keeps CPI below 2.5% once things settle down. The Treasury might now lean on the BOE to print more money.No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
grizzly1911 wrote: »The problems stare when you can't afford to buy the things you need to survive. Water, Food, Warmth, Shelter. Cheaper 54" plasma screens are irrelevant.
If you stop buying them then they will drop out of the CPI; is there e.g. evidence that the number of plasma screens being bought has fallen significantly?
The issue is the silly euphoria because the rate of inflation is only 2% even though many people haven't had comparable increase in income.
That is no reason to critise the index. (don't shoot the messenger)0
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