RPI inflation figure unchanged !!!

martinman3

Well it seems that RPI inflation has not increased in the last month according to the official figures.
Others have suggested that the figures may be fixed and I am now inclined to agree, read the following from the http://www.statistics.gov.uk site

RPI inflation was 4.1 per cent in February, unchanged from January. The main factors affecting the CPI also affected the RPI. Additionally, there was a large downward contribution from housing.

The effect came mainly from mortgage interest payments where there was a smaller increase than last year but there was also a large downward effect from house depreciation.

Isn't it strange how when houses depreciate it holds the RPI down but in 7 or more years of strong appreciation it seems to have had little or no effect on RPI ??????

free4440273

Any excuse to cut rates...and last Friday in the USA the Fed said inflation had come down :rolleyes:

mr_fishbulb

There must have been a sale on muffins this month.

bristolleedsfan

Sky News CPI article here: http://news.sky.com/skynews/article/0,,30400-1309663,00.html

Rafter

I think the problem Martin is that everyone has their own personal rate of inflation.

If you are earning 'average' wages and don't drive much, only buy basic food and clothes and have purchased a new TV in the last 12 months then sure, your inflation rate may well be 4%.

Live in a big house, pay council tax, high energy bills, drive a lot though and your inflation rate could be double the 'average'. Mine has been over 10% for the last 6 months!

www.statistics.gov.uk/pic/

R.

martinman3

Rafter wrote: »

I think the problem Martin is that everyone has their own personal rate of inflation.

If you are earning 'average' wages and don't drive much, only buy basic food and clothes and have purchased a new TV in the last 12 months then sure, your inflation rate may well be 4%.

Live in a big house, pay council tax, high energy bills, drive a lot though and your inflation rate could be double the 'average'. Mine has been over 10% for the last 6 months!

www.statistics.gov.uk/pic/

R.

I accept that but it is reason given by the ONS that bothers me. If "house price depreciation" is really used to calculate it then why not car price depreciation or any other depreciation, RPI would be negative then !

This figure must be a mistake.

purch

If "house price depreciation" is really used to calculate

Asset depreciation or appreciation are not used in the calculation of CPI or RPI

The contribution from 'Housing' does not refer to depreciation in values.

The RPI Index includies 'Mortgage Interest' in it's basket

IGK

martinman3 wrote: »

Well it seems that RPI inflation has not increased in the last month according to the official figures.
Others have suggested that the figures may be fixed and I am now inclined to agree, read the following from the http://www.statistics.gov.uk site



Isn't it strange how when houses depreciate it holds the RPI down but in 7 or more years of strong appreciation it seems to have had little or no effect on RPI ??????

I think we're getting confused here as to exactly what is meant my "house depreciation" It doesn't mean house price depreciation, what it really means is the costs to repair wear-and-tear on your house to maintain it at a consistent quality.

From http://www.statistics.gov.uk/downloads/theme_economy/New_inflation_target_031210.pdf

House depreciation. This is designed to measure the ongoing costs homeowners
face to maintain their properties at constant quality, and is imputed in the RPIX by a
smoothed house price series;

Arcaine

I put up a post a while back about my views on inflation measures, and I am too lazy to type a new one... :rolleyes:

http://forums.moneysavingexpert.com/showthread.html?t=763143

martinman3

Thanks, that makes some sense.

I read some of that document and the odd thing is that it acknowledges that calculating depreciation in the way it does may be a problem. It says

63 (Shortened) The measurement of depreciation costs through house prices also causes
problems in that the latter are strongly influenced by land prices in the UK, which is
likely to distort estimates of depreciation costs for the dwellings. Moreover, inclusion of
house prices means that the index is affected by changes in the price of a major
household asset, and hence a wide range of factors that determine household investment

portfolio decisions.

and

65.As with the introduction of depreciation into the RPI in 1995, a key problem arises
in that none of the house price indices currently available in the UK exclude the price of
land, and this can exaggerate changes in the cost of the dwellings themselves. The
impact will be significant if land represents a high proportion of overall house prices
and its price moves differently from the house construction costs and construction
companies. profits. Indeed, there is good evidence, for example at the regional level,

that changes in the price of land have a strong impact on UK house prices

It says little about how it is calculated except to say it is

Represented in RPIX by house
depreciation, and proxied by house
prices. Represented by

construction costs in HICP

and had a weighting in RPIX of 4.4% in 2003 which is high compared to "House transaction costs" at 0.6% and "Insurance" at 0.7%.

But what the h*** does "proxied by house prices" mean ?

MiserlyMartin

We've been shafted again by this government