RPI and Inflation changes - what's the big deal?

[sleep envy]

can anyone explan what happens when the RPI goes down and inflation increases?

it seems at odds to me that the basket of goods the market is measured at goes down and yet at the same time inflation inreases?

[JRM]

The RPI includes mortgage repayments, which for lucky b*stards have dropped through the floor.

It's the CPI index you want to look at for just a basket of goods

[Murray993]

surely you are not suggesting the figures are being "managed" to suit....

[sleep envy]

Murray993 said:

surely you are not suggesting the figures are being "managed" to suit....

[limpsfield]

Murray993 said:

surely you are not suggesting the figures are being "managed" to suit....

yesterday's CPI figure definitely didn't suit.

http://www.independent.co.uk/news/business/comment...

"the persistence of relatively high inflation has made the Bank of England's already daunting policy challenge that much more difficult.

[trickywoo]

Pay rises tend to be based on RPI. CPI shows how most peoples cost of living is going up.

If RPI is 0 and CPI is positive its not good news for your average wage slave.

[ipitythefool]

trickywoo said:

Pay rises tend to be based on RPI. CPI shows how most peoples cost of living is going up.

If RPI is 0 and CPI is positive its not good news for your average wage slave.

Funny that for much of the past 4/5 years the exact opposite criticism has been levelled at the government and the BoE. That it should be focussed more on RPI than CPI.

[mondeoman]

The problem is its manipulated to suit - I mean who the feck buys an MP4 player every month, yet thats in the CPI basket ...

To my mind it should be mortgage/rent for "typical" 3 bed house, 1 tank of fuel, gas, water, electric, road tax, insurance, council tax and then a "typical" weekly shop - bread, meat, veg, milk, y'know, the basic stuff. And it should be the same, year in, year out. Change the contents of the basket and you're cheating as far as I can tell.

[ipitythefool]

mondeoman said:

The problem is its manipulated to suit - I mean who the feck buys an MP4 player every month, yet thats in the CPI basket ...

To my mind it should be mortgage/rent for "typical" 3 bed house, 1 tank of fuel, gas, water, electric, road tax, insurance, council tax and then a "typical" weekly shop - bread, meat, veg, milk, y'know, the basic stuff. And it should be the same, year in, year out. Change the contents of the basket and you're cheating as far as I can tell.

Why?
If we keep it the same year in year out, why don't we include suet and beef dripping?

As to MP4 players everyone buys them on average. OK it may only be 0.05 of a unit per person per year, but it is still bought and should be included.

By your logic not everyone drives a car, so why would you include road tax and car fuel?

[ninja-lewis]

mondeoman said:

The problem is its manipulated to suit - I mean who the feck buys an MP4 player every month, yet thats in the CPI basket ...

To my mind it should be mortgage/rent for "typical" 3 bed house, 1 tank of fuel, gas, water, electric, road tax, insurance, council tax and then a "typical" weekly shop - bread, meat, veg, milk, y'know, the basic stuff. And it should be the same, year in, year out. Change the contents of the basket and you're cheating as far as I can tell.

The reason the basket changes is to reflect the changing tastes of society. Inflation in VHS tapes isn't representative of DVDs but DVDs are now much more common in the average consumer's basket so obviously you'll change it. Nowadays, we also spend a higher proportion of our income on what might be considered luxury goods so it can't just cover 'basic' goods. It shouldn't matter how often you buy a good since the weightings of each good are designed to take that into account.

[cardigankid]

The point is that by setting what is included and what is excluded, the Government effectively manipulates the headline rate of inflation. For example, clothes dropped in price dramatically over the last decade, but that was due to cheap foreign production and not deflation. Likewise they can manipulate tax and interest rates and the resulting costs. If you control the data you can make the statistics say anything you like.

[Bing o]

Instead of saying MP4 players, why don't they just call them portable media players so that you can track from the Walkman era through to the Ipod era and beyond?

[mondeoman]

ninja-lewis said:

mondeoman said:

The problem is its manipulated to suit - I mean who the feck buys an MP4 player every month, yet thats in the CPI basket ...

To my mind it should be mortgage/rent for "typical" 3 bed house, 1 tank of fuel, gas, water, electric, road tax, insurance, council tax and then a "typical" weekly shop - bread, meat, veg, milk, y'know, the basic stuff. And it should be the same, year in, year out. Change the contents of the basket and you're cheating as far as I can tell.

The reason the basket changes is to reflect the changing tastes of society. Inflation in VHS tapes isn't representative of DVDs but DVDs are now much more common in the average consumer's basket so obviously you'll change it. Nowadays, we also spend a higher proportion of our income on what might be considered luxury goods so it can't just cover 'basic' goods. It shouldn't matter how often you buy a good since the weightings of each good are designed to take that into account.

And?

The basic needs of a person/family should be covered.. thats shelter, food and transport. Anything else is a luxury, and shouldn't be included.

If you know how to cook ou will use suet and beef dripping, so thats a stupid arguement

Anything else gives the "politician" the ability to manipulate the figures.

Do you REALLY believe that inflation in what you spend the majority of your money on (mortgage/rent, food and transport) is as low as they say it is?

[Magog]

I remember a couple of years ago they started including USB drives. Things like that and dvd-r's etc always fall dramatically in price incredibly quickly once they are established on the market, same goes with digital cameras, music players, dvd players, flat screen TVs. It really strikes me as cynical manipulation of the figures including items which by their very nature are almost certain to fall in price.

[ACEparts_com]

The cpi / rpi is a bit like a car with two speedo's, Gordon has put his foot down on the printing presses because he is simply looking at RPI speedo and thinks he's decelerating to a near standstill when in actual fact the car is accellerating over the limit!

[Soft Top]

trickywoo said:

Pay rises tend to be based on RPI. CPI shows how most peoples cost of living is going up.

If RPI is 0 and CPI is positive its not good news for your average wage slave.

Surely the average wage slave has a mortgage so unless they are fixed in then mortgage decrease will offset the other increases.

[JRM]

Soft Top said:

trickywoo said:

Pay rises tend to be based on RPI. CPI shows how most peoples cost of living is going up.

If RPI is 0 and CPI is positive its not good news for your average wage slave.

Surely the average wage slave has a mortgage so unless they are fixed in then mortgage decrease will offset the other increases.

I think most, or at least a huge amount of mortgages are on fixed terms, despite what the Daily Mail tells us about everyone playing 1p a month. That's part of th eproblem, as the government tries to stimulate the economy with lower rates, not everyone benefits immediately.
In fact anyone on fixed rate with some savings will have no reutn from their cash and still a big mortgage payment so is MUCH worse off since this started happening

[ZondaMan]

JRM said:

Soft Top said:

trickywoo said:

Pay rises tend to be based on RPI. CPI shows how most peoples cost of living is going up.

If RPI is 0 and CPI is positive its not good news for your average wage slave.

Surely the average wage slave has a mortgage so unless they are fixed in then mortgage decrease will offset the other increases.

I think most, or at least a huge amount of mortgages are on fixed terms, despite what the Daily Mail tells us about everyone playing 1p a month. That's part of th eproblem, as the government tries to stimulate the economy with lower rates, not everyone benefits immediately.
In fact anyone on fixed rate with some savings will have no reutn from their cash and still a big mortgage payment so is MUCH worse off since this started happening

As far as I was always taught, the majority of UK mortgage holders are on variable rates. It was always brought up in the Euro debate, as we have a higher proportion of variable rate debt than other Europeans.

[ipitythefool]

mondeoman said:

Do you REALLY believe that inflation in what you spend the majority of your money on (mortgage/rent, food and transport) is as low as they say it is?

Ok I'll take you up on that offer.

Mar 2008:
Mortgage £1580
Coucil Tax £101
Service Charge £70
Home ins £33
Gas/Elec £70
Car Fuel (90ltrs) £96
Travelcard £109
Car tax/ins £105
Food (approx) £150
Total: £2314

Mar 2009:
Mortgage £944
Council Tax £105
Service Charge £70
Home ins £35
Gas/Elec £70
Car Fuel (90ltrs) £81
Travelcard £116
Car tax/ins £110
Food approx £175
Total: £1707

Inflation at MINUS 26%
(oh and I have a part-fixed repayment mortgage)

[JagLover]

mondeoman said:

The problem is its manipulated to suit - I mean who the feck buys an MP4 player every month, yet thats in the CPI basket ...

To my mind it should be mortgage/rent for "typical" 3 bed house, 1 tank of fuel, gas, water, electric, road tax, insurance, council tax and then a "typical" weekly shop - bread, meat, veg, milk, y'know, the basic stuff. And it should be the same, year in, year out. Change the contents of the basket and you're cheating as far as I can tell.

That would be a cost of living index rather than the rate of inflation in the economy generally.