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What Is The Real Rate Of Inflation?

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The CPI is showing annual inflation running at close to 2%, but it's an index which excludes a whole raft of expenditures that have risen by far more; council tax et al.

What are your views on the REAL inflation rate?

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The CPI is showing annual inflation running at close to 2%, but it's an index which excludes a whole raft of expenditures that have risen by far more; council tax et al.

What are your views on the REAL inflation rate?

We've had a thread on this already recently. I think its more like 8% at present, and thats excluding house prices.

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The CPI is showing annual inflation running at close to 2%, but it's an index which excludes a whole raft of expenditures that have risen by far more; council tax et al.

What are your views on the REAL inflation rate?

8-10% is how it feels to me.

anyway thats how much i'm putting my prices up

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The CPI is showing annual inflation running at close to 2%, but it's an index which excludes a whole raft of expenditures that have risen by far more; council tax et al.

What are your views on the REAL inflation rate?

Define what you mean by "inflation", please. The CPI measures increases in consumer prices, and it's pretty accurate for that (bearing in mind that neither taxes of any kind nor mortgage payments are consumption), so what you're saying is not that the figures are wrong, but that they're measuring the wrong thing. So what should they be measuring?

Edited by zorn

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I would probably make sense to have a "cost of living" index.

CPI may be very good (or not) at creating economic models, but for those of us who can't cut out council tax, mortgage repayments, gas, electricity, petrol and food it's pretty close to meaningless.

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I would probably make sense to have a "cost of living" index.

CPI may be very good (or not) at creating economic models, but for those of us who can't cut out council tax, mortgage repayments, gas, electricity, petrol and food it's pretty close to meaningless.

The CPI includes gas, electricity, petrol and food, you know -- it's just taxes and mortgages that are excluded.

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The CPI includes gas, electricity, petrol and food, you know -- it's just taxes and mortgages that are excluded.

But they're weighted, right?

The trouble with high energy prices is that they disproportionately affect those on lower incomes. seeing as 50% of people in this country earn less than 19k (if that's still correct?) then I would have thought that the massive increases in energy prices we've seen in the last couple of years have effected the "cost of living" more than the CPI's 2%pa.

Are you arguing that the CPI is a "good" measure of inflation for the average earner?

Edited by Bear Goggles

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I would probably make sense to have a "cost of living" index.

That would be RPI All Items (currently running at 2.2%) plus some allowance for council tax. If we assume council tax rises averaging 4.5%, and that council tax represents 10% of the average person's cost of living, that would take the rate to 2.4%. That measure includes everything you have asked to be included.

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That would be RPI All Items (currently running at 2.2%) plus some allowance for council tax. If we assume council tax rises averaging 4.5%, and that council tax represents 10% of the average person's cost of living, that would take the rate to 2.4%. That measure includes everything you have asked to be included.

So what are energy costs as a percentage of the average income, and does the RPI take account of it?

Have council taxes risen at an average of 4.5% over the last few years? I think it may be slightly higher than that. know they're capped at 4.5% this year.

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That would be RPI All Items (currently running at 2.2%) plus some allowance for council tax. If we assume council tax rises averaging 4.5%, and that council tax represents 10% of the average person's cost of living, that would take the rate to 2.4%. That measure includes everything you have asked to be included.

I assume that you were the one Nu Labour idiot who voted for real inflation running at 2% in my recent poll?

The real rate of inflation is a measure of how much less you have in your pocket at the end of each month. The majority of the intelligent public know that it is no where NEAR 2%!

So your Nu Labour Phoney Bliar/'Crash' Gordon statisical gymnastics are therefore wasting their time here as no one believes you. Get back to work public servant! We're paying your wages to write that tripe.... :angry:

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So what are energy costs as a percentage of the average income, and does the RPI take account of it?

Have council taxes risen at an average of 4.5% over the last few years? I think it may be slightly higher than that. know they're capped at 4.5% this year.

CPI weightings are detailed here:

http://www.statistics.gov.uk/articles/econ...ET620_Baran.pdf

Some interesting weightings:

Electricity: 1.4%

Gas: 1.2%

Restaurants & cafes: 10.8%

Appliances and products for personal care: 2.1%

Maybe this acurately represents Zorn's lifestyle, but it doesn't represent mine.

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So what are energy costs as a percentage of the average income, and does the RPI take account of it?

Have council taxes risen at an average of 4.5% over the last few years? I think it may be slightly higher than that. know they're capped at 4.5% this year.

The last few years don't matter. Anything before a year ago has no effect at all on the current inflation rate.

I was wrong, by the way. Council tax is included in RPI.

Weights are as follows:

Council tax - 3.9%

Electricity - 1.5%

Gas - 1.3%

Petrol & oil - 3.5%

Overall housing costs, which include mortgage interest, rents, depreciation, water/gas/electricity and council tax are 22.4%.

These weights seem OK -- average net household income is around £25,000, so that would imply average council tax bills of £975 (don't forget that many poorer people get discounts) and electricity+gas bills of £700 per year, not a million miles out.

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The last few years don't matter. Anything before a year ago has no effect at all on the current inflation rate.

I was wrong, by the way. Council tax is included in RPI.

Weights are as follows:

Council tax - 3.9%

Electricity - 1.5%

Gas - 1.3%

Petrol & oil - 3.5%

Overall housing costs, which include mortgage interest, rents, depreciation, water/gas/electricity and council tax are 22.4%.

These weights seem OK -- average net household income is around £25,000, so that would imply average council tax bills of £975 (don't forget that many poorer people get discounts) and electricity+gas bills of £700 per year, not a million miles out.

Let the research assistant have a break and a coffee now eh.

:)

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Maybe this acurately represents Zorn's lifestyle, but it doesn't represent mine.

The point is, CPI/RPI etc aren't ever supposed to represent any one person's lifestyle. An index based on your personal lifestyle is never going to be much use to policymakers - it has to reflect the average.

Whatever you think, CPI and RPI are compiled by experienced statisticians, using transparent and well established procedures, and conforming with international guidelines. The weights may not make sense to you but they aren't just arbitrary.

Just because they don't conform to your personal view of the world, don't be too quick to criticise them.

Do they represent a cost of living index for the poorest in society? No. But nobody ever claimed they did. And while such an index would have important social implications, you can't base monetary policy on it.

Now hedonic adjustments on the other hand....

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Petrol and oil 3.5% - don't make me laugh!!!!!

Petrol and oil 3.5% - don't make me laugh!!!!!

It seems a bit on the low side, and will probably need to go up to more like 4.5% the next time they reweight, to reflect the higher petrol prices. It implies average household expenditure of around £900 on petrol, and it's probably more like £1100-1200 (1.3 cars per household, average private mileage of 8,000 miles (business miles that are paid for by companies don't count), average consumption of 35 miles per gallon).

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The point is, CPI/RPI etc aren't ever supposed to represent any one person's lifestyle. An index based on your personal lifestyle is never going to be much use to policymakers - it has to reflect the average.

Whatever you think, CPI and RPI are compiled by experienced statisticians, using transparent and well established procedures, and conforming with international guidelines. The weights may not make sense to you but they aren't just arbitrary.

Just because they don't conform to your personal view of the world, don't be too quick to criticise them.

Do they represent a cost of living index for the poorest in society? No. But nobody ever claimed they did. And while such an index would have important social implications, you can't base monetary policy on it.

Now hedonic adjustments on the other hand....

You, of course, make a valid point.

Statistics, analysis and their theoretical bases mean little to many. Can I afford it, mortgage, car or whatever, when I want it?

Trumpet CPI at 2% but if the most recent "official" bill is more than that and people start to question that 2%.

Yes, people will look at all this with reference to their lifestyle and their consumption choices therein.

I thought Politicians prided themselves on "judging the mood of the Nation". I wonder if they might be losing that faculty.

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In the RPI, restaurants represent 2.5%. Another 1.9% for takeaways and snacks, and 4.9% for catering, which seems high, but don't forget how much people spend on weddings.

So, Mr. and Mrs. Mushroom who rarely eat out, do not have takeaways or "snacks"(junk in our book) and had their Nuptials ages ago ignore such things.

However, the latest Council Tax bill, Income Tax, NI contributions, Insurance Tax etc. oh, and the price of my cigars, do get noticed.

Then there's petrol and other energy prices and have you seen the price of organic strawberries.

Sentiment is all.

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It seems a bit on the low side, and will probably need to go up to more like 4.5% the next time they reweight, to reflect the higher petrol prices. It implies average household expenditure of around £900 on petrol, and it's probably more like £1100-1200 (1.3 cars per household, average private mileage of 8,000 miles (business miles that are paid for by companies don't count), average consumption of 35 miles per gallon).

So with energy in general becoming a larger proportion of household income, and this likely to be disproportionately affecting lower income households. I suppose it would help explain the disgraceful widening gap between the rich an the poor in this country despite record employment, under a government elected on a mandate of social justice?

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My God, this is turning into an Nu Labour aren't we doing well rant! Utter Shite!!

Sorry, if the man on the street sees that the 'actual' inflation hitting his pocket is significantly more than 2% then either the system is total B-ollocks or this is another Nu Labour / praise Phoney Bliar rant?

How come there are record bankruptcies if all is well in Nu Labour land?

Economy is going down the toilet Zorn, face it. An its your party that has destroyed this country.

Huh?

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