Difference between CPI and RPI

Gambler

Apologies if this is the wrong board.


Just been asked this Q in work and I know it's something to do with 'baskets' but just been googling and the national statisitics website is far too much info :eek:


In a nutshell what is the difference?



Thanks

JonnyBravo

Gambler wrote: »

Apologies if this is the wrong board.


Just been asked this Q in work and I know it's something to do with 'baskets' but just been googling and the national statisitics website is far too much info :eek:


In a nutshell what is the difference?



Thanks

"However, there are significant differences between the CPI and the RPI. The CPI excludes a number of items that are included in RPI-X (the previous target inflation measure), mainly related to housing. These include council tax and a range of owner-occupier housing costs such as mortgage interest payments, house depreciation, buildings insurance, estate agents' and conveyancing fees.
The two indices are also calculated differently. The different techniques used to combine individual prices in the two indices also reduces CPI inflation relative to RPIX. This is called the formula effect. When Gordon Brown announced the changeover in target measure the annual rate of RPI-X exceeded the CPI by more than 1%."


from

http://www.moneyextra.com/dictionary/consumer-price-index-003666.html

cifpower

I think the biggest difference is that the CPI does not include housing costs such as council tax or mortgage interest payments.

So why do the CPI and RPI values differ?

Not all the items covered by the RPI are included in the CPI measure.

For example, the CPI does not include council tax, mortgage interest payments and some other housing costs.

The CPI measure also includes some items - such as charges for financial services - which are not in the RPI.

Another difference is that the CPI measure covers a broader sample of the population in its calculations than RPI.

http://news.bbc.co.uk/1/hi/business/6356475.stm

JohnInDebt

Gambler wrote: »

Apologies if this is the wrong board.


Just been asked this Q in work and I know it's something to do with 'baskets' but just been googling and the national statisitics website is far too much info :eek:


In a nutshell what is the difference?



Thanks

The quick answer is that CPI (Consumer Price Index) only looks at the goods that the Government want to look at to keep the Public Sector workers pay down and the RPI (Retail Price Index) is a more realistic look at inflation.

The last I checked CPI was 2.5% and RPI was 4.1%

Gambler

Thanks all, I've just been looking myself too and tooks like the housing (biggest cost for most people) is not included in CPI - marvellous !!

Found this quote great too:

A spokesman for the Office for National Statistics said: "The CPI and RPI are specifically not intended to measure what people often refer to as 'the cost of living'."

WTF?_2

JohnInDebt wrote: »

The quick answer is that CPI (Consumer Price Index) only looks at the goods that the Government want to look at to keep the Public Sector workers pay down and the RPI (Retail Price Index) is a more realistic look at inflation.

The last I checked CPI was 2.5% and RPI was 4.1%

... and real inflation is probably running closer to 10%. Does anyone believe that their outgoings have only gone up 2.5% or 4.1% over the last 12 months?

MrChips

I think I read somewhere a while back that CPI is calculated as a geometric average, whereas RPI is an arithmetic average . So even if they included the same basket, CPI would be lower.

clutton_2

either way there are statistics statistics and damned lies ............

abaxas

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

Joseph Goebbels

Debt_Free_Chick

The National Statistics Office produces a number of different measures of RPI - there isn't just "one RPI". RPIX, for example, is a measure of RPI which excludes mortgage interest. There's even an index for "pensioners' RPI"

If you take a look at page 166 of the Monthly Bulletin you get a feel for what's included in the different indices.

If you're really interested, the ONS even publishes the items that goes into the different baskets

Benefits_Blagger

My benefits go up by RPI, public sector workers goes up by CPI, RPI is always higher. at some point in the future benefits will pay more than working in the public sector.