Core Cpi

[Ash4781]

http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2015/consumer-price-inflation-summary--january-2015.html

'Core CPI' excludes food, energy, alcohol and tobacco. The index already excludes housing costs. Core CPI is charted but which reference table is it as I can only see CPI (all items) and CPIH?

In my budget core inflation would exclude the majority of costs.

[wish I could afford one]

http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2015/consumer-price-inflation-summary--january-2015.html

'Core CPI' excludes food, energy, alcohol and tobacco. The index already excludes housing costs. Core CPI is charted but which reference table is it as I can only see CPI (all items) and CPIH?

In my budget core inflation would exclude the majority of costs.

Looking at my spending tracker in order of spend - 66% is going on rent, 13% is going on food, 12% is going on work costs which is mostly fuel (energy?) and 6% on utilities which is mostly leccy (so energy). So I'm 91% of spend in with none of them being in the core CPI. Next on my list is Council Tax - does that one count in core CPI?

So for me core inflation also excludes most of my costs.

[Guest_northshore_*]

All items index/% is D7BT/D7G7

Core index/% is DKC6/DKO8

[Sancho Panza]

CPI ignores housing costs.RPI inc mortgage interest,depreciation,(lol),council tax,heating etcCPIH includes rent but bizarrely I believe,doesn't use the imputed rent valuations used to calculate GDP but rather it's own version.

Core CPI is therefore a rather ironic title as it pretty much covers everything that isn't a core component of life on this planet.

Edited March 1, 2015 by Sancho Panza

[Wurzel Of Highbridge]

The point of CPI is to exclude things that are volatile, but then surely if you include enough random noise then it evens out making the index much more reliable,.

[renting til I die]

CPI ignores housing costs.RPI inc mortgage interest,depreciation,(lol),council tax,heating etcCPIH includes rent but bizarrely I believe,doesn't use the imputed rent valuations used to calculate GDP but rather it's own version.

Core CPI is therefore a rather ironic title as it pretty much covers everything that isn't a core component of life on this planet.

Seems like a complete joke! But then everything the office of national statistics does seems to be a bit of a joke now days!

[R K]

If energy was in core CPI BoE would have been printing money like confetti last 6 months.

Anyone making that case?

[Ah-so]

Looking at my spending tracker in order of spend - 66% is going on rent, 13% is going on food, 12% is going on work costs which is mostly fuel (energy?) and 6% on utilities which is mostly leccy (so energy). So I'm 91% of spend in with none of them being in the core CPI. Next on my list is Council Tax - does that one count in core CPI?

So for me core inflation also excludes most of my costs.

It is a form of bi-flation. The things we have to buy are going up in value, but the things we don't are going down in price. The government's preferred measure is the lower one and also the one that interest rates are least likely to influence.

[silver surfer]

Seems like a complete joke! But then everything the office of national statistics does seems to be a bit of a joke now days!

I'm not so sure, I think the ONS does a pretty good job, certainly when compared with genuinely clownish national statistics like those from Argentina.

We've got to remember that every individual has their own personal rate of inflation depending on how they spend their money, so it's probably wrong to expect that any national measure will accord perfectly with our own individual experiences. Also "core" inflation is probably a misnomer, it doesn't mean the "core" of anyone's expenditure, it's more of a technical measure to track the real drivers of self fuelling inflation or deflation.

It wasn't long ago when many of this forum were up in arms claiming the ONS were systemically and deliberately under recording inflation, the B of E was being pilloried for saying core inflation suggested that inflation would come down...but that's exactly what we've seen happen.

[renting til I die]

I'm not so sure, I think the ONS does a pretty good job, certainly when compared with genuinely clownish national statistics like those from Argentina.

We've got to remember that every individual has their own personal rate of inflation depending on how they spend their money, so it's probably wrong to expect that any national measure will accord perfectly with our own individual experiences. Also "core" inflation is probably a misnomer, it doesn't mean the "core" of anyone's expenditure, it's more of a technical measure to track the real drivers of self fuelling inflation or deflation.

It wasn't long ago when many of this forum were up in arms claiming the ONS were systemically and deliberately under recording inflation, the B of E was being pilloried for saying core inflation suggested that inflation would come down...but that's exactly what we've seen happen.

Haha, yes that is a fair point. A little bit of an emotional out burst on my part!

[Sancho Panza]

I'm not so sure, I think the ONS does a pretty good job, certainly when compared with genuinely clownish national statistics like those from Argentina.

We've got to remember that every individual has their own personal rate of inflation depending on how they spend their money, so it's probably wrong to expect that any national measure will accord perfectly with our own individual experiences. Also "core" inflation is probably a misnomer, it doesn't mean the "core" of anyone's expenditure, it's more of a technical measure to track the real drivers of self fuelling inflation or deflation.

It wasn't long ago when many of this forum were up in arms claiming the ONS were systemically and deliberately under recording inflation, the B of E was being pilloried for saying core inflation suggested that inflation would come down...but that's exactly what we've seen happen.

I think the general issue many on this forum have is that all the inflation indices have excluded the base cost of a house from their figures and still do.It's enabled CB's and banks to blow a massive asset bubble that taxpayers will be on the hook for when it bursts and the banks can't cover their liabilities.The price of a house these days is somewhat north of the cost of a weekly shop or the average households annual fuel bill.The salinet point is that the ONS have been misrepresenting the actual changes in the cost of living for a very long time.

It's also enabled politicians to run up large nominal national debts on the back of increasingly real GDP(and we all know the GDP figures are as bogus as the inflation ones).

[silver surfer]

Haha, yes that is a fair point. A little bit of an emotional out burst on my part!

Hardly! You strike me as one of the most open minded, least emotional people on this forum.

[honkydonkey]

If only we could eat and live in flat screen TV's.

[wish I could afford one]

If only we could eat and live in flat screen TV's.

At the rate we're going some of us will be living in the boxes of flat screen TV's in the not to distant future - the essential workers home with the boss living in a shipping container.

[Guest]

Inflation should be measuring the cost of living. The statistics don't measure this.

You have to pay for a roof over your head. Most of the statistics exclude housing costs, and the ones that include it don't track the actual cost of a house but rather some made up fudge figure that allows them to ignore the real cost. Houses quadruple in price, and yet 'inflation' remains low.

You have to buy food. But the 'basket' is continually updated to 'track buying habits', so as shrinkflation hits and people start shopping in Lidl instead of Waitrose, the goods that are tracked change to compensate. People's actual spending power declines and yet 'inflation' remains unchanged.

You don't have to buy iPads or plasma TVs, and if you do, you only buy one a year, if that. And yet these rapidly depreciating goods make up a huge chunk of the figure.

I do believe the figures are engineered in order to exclude 'asset' price inflation and in order to suppress wage demands. This ensures that the rich get richer while the working poor stay poor.

And yet even with all of that, Mervyn King still couldn't stay on target. How many letters did he write, again? How many fan charts ended up right on target, two years in the future?

It's all a meaningless con, like all the other made-up figures in finance.

[R K]

Inflation should be measuring the cost of living. The statistics don't measure this.

You have to pay for a roof over your head. Most of the statistics exclude housing costs, and the ones that include it don't track the actual cost of a house but rather some made up fudge figure that allows them to ignore the real cost. Houses quadruple in price, and yet 'inflation' remains low.

You have to buy food. But the 'basket' is continually updated to 'track buying habits', so as shrinkflation hits and people start shopping in Lidl instead of Waitrose, the goods that are tracked change to compensate. People's actual spending power declines and yet 'inflation' remains unchanged.

You don't have to buy iPads or plasma TVs, and if you do, you only buy one a year, if that. And yet these rapidly depreciating goods make up a huge chunk of the figure.

I do believe the figures are engineered in order to exclude 'asset' price inflation and in order to suppress wage demands. This ensures that the rich get richer while the working poor stay poor.

And yet even with all of that, Mervyn King still couldn't stay on target. How many letters did he write, again? How many fan charts ended up right on target, two years in the future?

It's all a meaningless con, like all the other made-up figures in finance.

On the other hand you dont buy a house every year either and if you did you would also be a seller. So Im not sure why the nominal price of a house ought to be included in a "cost of living" index. You dont consume the purchase price of a house. Its a capital asset not a consumption good.

Autos are financed with credit but they dont increase at 20% p.a. Why? Because it is a competitive market and supply isnt kept permanently & significantly below demand.

Edited March 1, 2015 by R K

[honkydonkey]

On the other hand you dont buy a house every year either and if you did you would also be a seller. So Im not sure why the nominal price of a house ought to be included in a "cost of living" index. You dont consume the purchase price of a house. Its a capital asset not a consumption good.

Autos are financed with credit but they dont increase at 20% p.a. Why? Because it is a competitive market and supply isnt kept permanently & significantly below demand.

It's not a daily consumption cost, but it's still relevant. At some point in peoples lives you will need to 'consume' the cost, sure it's not consumption in the true sense of the word but it's still a cost that is relevant to your 'cost of living' which should be taken into account.

[Guest]

On the other hand you dont buy a house every year either and if you did you would also be a seller. So Im not sure why the nominal price of a house ought to be included in a "cost of living" index. You dont consume the purchase price of a house. Its a capital asset not a consumption good.

Autos are financed with credit but they dont increase at 20% p.a. Why? Because it is a competitive market and supply isnt kept permanently & significantly below demand.

Someone should have been targeting stability in house prices as well as stable 'inflation', then. If they can fix interest rates in order to target milk prices then why not fix them to ensure houses remain affordable? Interest rates have a much more direct effect on the cost of a house (through mortgage costs) than they do on the cost of food, after all.

But I guess bribing voters will free equity and cashing in on the exploitation of the working and middle classes was the establishment's preferred choice.

[mmt]

On the other hand you dont buy a house every year either and if you did you would also be a seller. So Im not sure why the nominal price of a house ought to be included in a "cost of living" index. You dont consume the purchase price of a house. Its a capital asset not a consumption good.

Autos are financed with credit but they dont increase at 20% p.a. Why? Because it is a competitive market and supply isnt kept permanently & significantly below demand.

So why include it in GDP- imputed rent?

[onlyme2]

On the other hand you dont buy a house every year either and if you did you would also be a seller. So Im not sure why the nominal price of a house ought to be included in a "cost of living" index. You dont consume the purchase price of a house. Its a capital asset not a consumption good.

Autos are financed with credit but they dont increase at 20% p.a. Why? Because it is a competitive market and supply isnt kept permanently & significantly below demand.

As a country we do buy and rent houses every year. As a country businesses buy and rent a parallel set of properties (in the same bubble).

A big factor in many industries being totaly priced out of the UK.

Lots more to come, including services.

[Sancho Panza]

On the other hand you dont buy a house every year either and if you did you would also be a seller. So Im not sure why the nominal price of a house ought to be included in a "cost of living" index. You dont consume the purchase price of a house. Its a capital asset not a consumption good.

Autos are financed with credit but they dont increase at 20% p.a. Why? Because it is a competitive market and supply isnt kept permanently & significantly below demand.

Whilst you don't buy a house every year,people do, on the whole pay for them over twenty five years.In a similar manner to the way they might purchase a flat screen TV over 36 months.

The central premise of your argument seems predicated on a house being a capital asset,which it is,until

a ) the price starts going down when it starts becoming a liability

b ) you stop paying the mortgage and the bank choose to stop allowing you to use it as a capital asset.

Any system of inflation measurement that excludes most families largest monthly outgoing and the costs associated with consuming it,are asking for a bubble and a collapse.

Edited March 2, 2015 by Sancho Panza

[Sancho Panza]

Someone should have been targeting stability in house prices as well as stable 'inflation', then. If they can fix interest rates in order to target milk prices then why not fix them to ensure houses remain affordable? Interest rates have a much more direct effect on the cost of a house (through mortgage costs) than they do on the cost of food, after all.

But I guess bribing voters will free equity and cashing in on the exploitation of the working and middle classes was the establishment's preferred choice.

Yep.

Succinctly put.

[R K]

Someone should have been targeting stability in house prices as well as stable 'inflation', then. If they can fix interest rates in order to target milk prices then why not fix them to ensure houses remain affordable? Interest rates have a much more direct effect on the cost of a house (through mortgage costs) than they do on the cost of food, after all.

But I guess bribing voters will free equity and cashing in on the exploitation of the working and middle classes was the establishment's preferred choice.

In most markets supply will rise to meet demand. Clearly UK housing market is "broken" in that sense. Thats were Id start.

govt have the power to influence that but choose not to.

Also ofc BoE can alter bank capital weightins, implement macro-pru lending restrictions etc

But really its a question of desire. If "UK" as a society wants lower house prices over longer term it simply has to choose to have them and implement policies to that end. Its really not difficult.

[R K]

It's not a daily consumption cost, but it's still relevant. At some point in peoples lives you will need to 'consume' the cost, sure it's not consumption in the true sense of the word but it's still a cost that is relevant to your 'cost of living' which should be taken into account.

Well int rates have fallen such that its cheaper to consume housing today than in 2007. So from that perspective cost of living in a house has fallen markedly. Obviously as a result the capital cost of the asset has risen but for FTBs the lower int rate means the "cost" is still about as low as it has been in any prior cycle.

"Price" is a bit of a red herring in that sense (consumption inflation)