CPI is 2%.

CLAPTON

antrobus wrote: »

But it is included in RPI. So it would be RPI that was being "kept artifically low" by council tax freezes.:)

very good point: of course RPI is higher than CPI even though it's being keep artificially low by council tax freeze
puzzling

Andy_L

Tancred wrote: »

CPI is complete rubbish. It is being kept artifically low because of a few things like council tax and petrol not going up over the past year; unfortunately the things which are going up are the ones that matter most to ordinary people, e.g. food and public transport. CPI should be scrapped as a measure of inflation and replaced by RPIX.

RPIx includes council tax & petrol unlike CPI which excludes Council tax.

Andy_L

Tancred wrote: »

I'm trying to say that CPI is not giving a correct measure of inflation because it is overrepresenting some items and underrepresenting others in the overall basket. Just my opinion.

So why would RPIx not have the same problem?

Andy_L

CLAPTON wrote: »

very good point: of course RPI is higher than CPI even though it's being keep artificially low by council tax freeze
puzzling

Even if the baskets were identical CPI will be lower than RPI because the geometric mean it useswill, by its nature, return a lower average than RPI's arithmetic mean

antrobus

Andy_L wrote: »

Even if the baskets were identical CPI will be lower than RPI because the geometric mean it useswill, by its nature, return a lower average than RPI's arithmetic mean

Absolutely correct. The 'Formula Effect' i.e. the effect of using the geometric rather than the arithmetic mean, is responsible for the fact that the CPI has been something like a 0.5% to 1.00% lower than the RPI since the former's inception.

RPI is currently 2.7% compared to 2.0% for CPI. The 'Formula effect' reduced CPI by about 1%, the difference in 'Other Housing Cost Components' reduced CPI by 0.25% whilst 'Other differences including weights' increased CPI by 0.5%. Therefore to the extent that CPI is "overrepresenting some items and underrepresenting others" as alleged then the overall effect is to increase reported CPI compared to RPI.

BillJones

Tancred wrote: »

Stop boasting of your wealth Essex man! Nobody needs a 'Jag' or a BMW, only posers. I bought a Toyota Auris Hybrid and I'm delighted with it

Good for you. I bought a C63, and utterly love that, too.

cepheus

The Cost of Living Index, conducted through an exhaustive annual study by respected pay analysts Croner Reward, shows that the cost of living has been running well ahead of even the RPI for the last four consecutive years.

Last year, for instance, the cost of living rose 3.9 per cent. RPI is usually accused of overstating the impact of rising prices, but it actually ran at 3.1 per cent over the same time period, while CPI was hopelessly inaccurate at 2.6 per cent over the year.

http://www.leftfootforward.org/2014/01/the-inflation-magic-trick/

safestored4

CPI is manipulated in a host of ways.

For example, substitution, as previously referred to by a couple of posters.

Or Hedonics (if you don't know what this is see Wiki) where if the specification of a high tech item is improved but the price remains the same this is counted as a price reduction. The fact that you don't necessarily want the so called improvement is ignored.

Conversely, CPI takes no account of the deterioration in the quality of products. Our first kettle lasted 15 years. You are lucky to get 5 years these days. CPI only takes account of the initial price, not the fact that you will have to buy 3 against one previously.

Weighting. Each item in the index is given a percentage weighting. For example, food is assumed to represent around 12% of household spending. If food prices increase then if the weighting is reduced to, say 11% the increase will not be reflected in the index.

CPI takes no account of housing costs.

I could go, on but the important point is that CPI is now,and will be for the foreseeable future, linked to a range of State Benefits and the lower this can be manipulated the better. The same approach will apply whichever of our pathetic buch of political parties are in power.

purch

safestored4 wrote: »

I could go, on

Please don't

Andy_L

safestored4 wrote: »

CPI takes no account of housing costs.

Yes it does:
4.1 Actual Rents for Housing
4.3 Regular Maintenance and Repair of the Dwelling
4.4 Water Supply and Miscellaneous Services for the Dwelling
4.5 Electricity, Gas and Other Fuels
05.1 Furniture, Furnishings and Carpets
05.2 Household Textiles
05.3 Household Appliances
05.4 Glassware, Tableware and Household Utensils
5.6 Goods and Services for Household Maintenance

It excludes mortgage interest but then so does the RPIx index that the Bank of England used before the switch

http://www.ons.gov.uk/ons/guide-method/user-guidance/prices/cpi-and-rpi/cpi-and-rpi-basket-of-goods-and-services/cpi-and-rpi-2013-basket-of-goods-and-services.pdf