Inflation is running at twice the official rate

neverdespairgirl

The price of essential household goods and bills is rising at twice the official rate of inflation, forcing families to spend increasing amounts of their disposable income on basic items.


The rate of inflation for utility bills, food, transport, health and household maintenance is 5.1 per cent, according to analysis of official data undertaken for The Daily Telegraph by Capital Economics, the forecasting house.
This is 17 times the rate of inflation for luxury goods, such as the cost of eating at a restaurant, air fares, clothes, alcohol and electrical equipment, which is 0.3 per cent.And it is twice the 2.5 per cent rate of increase in the Consumer Prices Index (CPI), the Government's preferred measure of inflation.
http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/04/19/ncrisis319.xml

Generali

Each of us has our own inflation rate - the RPI is just an average which says no more about the rate of inflation I face than the average height of the UK population says about how tall I am.

If we were to take food and utility bills as the measure of inflation then inflation would have been negative for many years.

I think it would be a good idea for the ONS to have an 'Essentials Price Index' covering the costs of the unavoidable things that we have to spend money on. It would be pretty hard to set the weightings but it could be done.

teabelly

Food has been very cheap for a long time. It is now returning to a more natural level. The obese will have the worst time as they have been bingeing on cheap food and cheap credit so both their addictions have been turned off at once The falling prices in electronic goods have also disguised some of the increases.

WTF?_2

teabelly wrote: »

Food has been very cheap for a long time. It is now returning to a more natural level. The obese will have the worst time as they have been bingeing on cheap food and cheap credit so both their addictions have been turned off at once The falling prices in electronic goods have also disguised some of the increases.

Good to see you grasp the concept of a return to historical norms, teabelly.

Now repeat after me "Houses have been very expensive for a long time. They are now returning to a more natural level."

teabelly

!!!!!!? wrote: »

Good to see you grasp the concept of a return to historical norms, teabelly.

Now repeat after me "Houses have been very expensive for a long time. They are now returning to a more natural level."

House prices have been too cheap for too long and the HPI of recent years is a sign that they are returning to historical levels of being too expensive for the average person. More than 50% owner occupation has only been around since the 60s. In the 1930s it was 90% rented, 10% owner occupied. The massive house building of the 1960s has distorted the market and encouraged owner occupation when the natural state for us is to be like the rest of Europe and mostly rent. It all depends on what you think the natural state is and when you think we are returning to

Zammo

teabelly wrote: »

The obese will have the worst time as they have been bingeing on cheap food and cheap credit so both their addictions have been turned off at once

Krusty Allsop really having a hard time of it isn't she?

Generali

!!!!!!? wrote: »

Good to see you grasp the concept of a return to historical norms, teabelly.

Now repeat after me "Houses have been very expensive for a long time. They are now returning to a more natural level."

Mean reversion is a bit of a myth IMO. Prices have risen as demand has risen fuelled by easy and cheap lending. Now lending levels seem to be dropping back, demand should fall and prices fall.

Longer term, I also think that house prices will fall due mostly to baby boomers selling up to top up inadequate pensions.

MissMoneypenny

teabelly wrote: »

The massive house building of the 1960s has distorted the market and encouraged owner occupation when the natural state for us is to be like the rest of Europe and mostly rent. It all depends on what you think the natural state is and when you think we are returning to

I think that it is a British addiction to own your house, hence why people have been willing to borrow so much and put themselves in huge debt, which in turn helped fuel rising prices in recent years.

Now that the credit tap has been turned off, more people have realised (or been forced to realise because of the lack of ability to borrow) how insane the last few years have been. The Internet is making this crash more interesting.

IMO, the British will want to own homes again and will wait for the crash to bottom out. Distressed sellers won't have any choice when they have to sell/be repossessed.

WTF?_2

Generali wrote: »

Mean reversion is a bit of a myth IMO. Prices have risen as demand has risen fuelled by easy and cheap lending. Now lending levels seem to be dropping back, demand should fall and prices fall.

Longer term, I also think that house prices will fall due mostly to baby boomers selling up to top up inadequate pensions.

There are long term trends for a reason. They represent what is supported by fundamentals. Unless something radically changes long-term, they will revert to mean.

Extraordinarily cheap and easy credit has been what has boosted prices so far off of the mean. Without this to support the crazy levels of pricing, they will revert to what is supported by fundamentals. In fact, they'll almost certainly undershoot at some stage, such is the way these things tend to work.

epz_2

teabelly wrote: »

House prices have been too cheap for too long and the HPI of recent years is a sign that they are returning to historical levels of being too expensive for the average person. More than 50% owner occupation has only been around since the 60s. In the 1930s it was 90% rented, 10% owner occupied. The massive house building of the 1960s has distorted the market and encouraged owner occupation when the natural state for us is to be like the rest of Europe and mostly rent. It all depends on what you think the natural state is and when you think we are returning to

you do realise we live in a democracy, planning and bank lending dictate house prices, if you try and turn people into a surf class they are not stupid enough to just sit back and take it.


It would only require a party to addopt an incremental/punitive tax policy and allow more building to and most of the others would get bounced into it as well, i mean seriously nobody ever lost votes saying lets tax the super rich.

re your point about renting being the historical norm, take it back far enough and the norm is mud huts and wearing animal skins, who cares. People in this country have a legitamate expectation that if the work hard they will be able to buy a house, its an insane politician that tries to change that.

Generali

!!!!!!? wrote: »

There are long term trends for a reason. They represent what is supported by fundamentals. Unless something radically changes long-term, they will revert to mean.

Extraordinarily cheap and easy credit has been what has boosted prices so far off of the mean. Without this to support the crazy levels of pricing, they will revert to what is supported by fundamentals. In fact, they'll almost certainly undershoot at some stage, such is the way these things tend to work.

What's the fundamental value of a house? Is it the cost of rebuilding it? Or the value of the bricks, copper etc if you sold it off? Or a certain %age of the rent that the house would fetch?

My experience is that most long term trends are just lines on a piece of paper with no real significance.

I agree that houses are massively expensive I just disagree with your method of showing it.