Jump to content
House Price Crash Forum
homeless

Inflation Is At 2%, Im Suprised It Aint Less

Recommended Posts

i just popped over for a look on the governments site that works out what inflation is in this country.

looking over what constitutes the make up of inflation, it suprises me that there hasint actually been deflation.

Practically everything on the list has for years due to globalisation been going down in price, also responsible is government backed investigations into why we were paying more for items like new vehicles, cd's, music ect ect.

It is very apparent why inflation is so low.below ive put the general items used pasted from the government site to work out inflation.

* FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, service meals and snacks)

* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)

* APPAREL (men's shirts and sweaters, women's dresses, jewelry)

* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)

* MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)

* RECREATION (televisions, pets and pet products, sports equipment, admissions);

* EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);

* OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

Now here is the crunch

I think weve reached a point where none of these can reduce in price anymore, things such as cars and televisions from china were subjected in the last few years to one off reductions, i cannot see where these reductions can come from anymore.These items have obviously had a huge inpact on the cpi.But one off reductions cannot be repeated.

the only way is surely up, unless someone here can explain how these items can be reduced in price further than they have done.It seems to me we have been going through an extraordinary period in history where the countries selling goods and the people creating them has tripled, but it cant triple again to keep prices down.even china cant pay there workers less to create the same goods and infact as the chinese get wealthier the workers demands will grow.I dont think there has ever been a company or society where as the profits grew the people accepted or were subjected to wage decreases,so cant see there being one now.

Share this post


Link to post
Share on other sites

I'm afraid the answer to your question is very straighforward and has in fact already been done by the government once before.

Instead of the RPI we now use the CPI and when this becomes unrepresentative (or rather too high) we will no doubt shift into using the IPI (Incomprehensible Price Index).

The IPI will use figures for anything falling in price only... all other data sets will be removed. In fact Oil, Clothes, Energy, Housing etc. will cease to be considered inflationary indicators at all and the IPI may well be based on real cost savings of penny sweets (benchmarked in 1981) which have proportionately fallen significantly as many penny sweets still cost 1p!

Welcome to doublethink.... welcome to NuLab!

- Pye (Property Speculation Ninja :ph34r: )

Edited by pyewackitt

Share this post


Link to post
Share on other sites

Now here is the crunch

I think weve reached a point where none of these can reduce in price anymore, things such as cars and televisions from china were subjected in the last few years to one off reductions, i cannot see where these reductions can come from anymore.These items have obviously had a huge inpact on the cpi.But one off reductions cannot be repeated.

Oh boy!!! Have you hit the nail on the head IMO. Remember, rip-off Britain? I'm also surprised that inflation has stayed so high too! Supermarkets etc have cut their prices back to the bone. They can't go any lower!! This question now is not about companies reducing their prices, but insolvency because they can't make a decent margin. This will reduce competetion and stabilise prices. The retail sector has overexpanded.

Share this post


Link to post
Share on other sites

the only way is surely up, unless someone here can explain how these items can be reduced in price further than they have done.It seems to me we have been going through an extraordinary period in history where the countries selling goods and the people creating them has tripled, but it cant triple again to keep prices down.even china cant pay there workers less to create the same goods and infact as the chinese get wealthier the workers demands will grow.I dont think there has ever been a company or society where as the profits grew the people accepted or were subjected to wage decreases,so cant see there being one now.

I think you under estimate them

I don’t know if the CPI has TV’s on it but it will be upgraded to a flat screen at some point which will then get cheaper until it’s upgraded to a holographic set which will then get cheaper – and so on

How many other items are there on the CPI which get removed for the new standard

Computers – mp3 payers – vibrators – mobile phones

Share this post


Link to post
Share on other sites

I think you under estimate them

I don’t know if the CPI has TV’s on it but it will be upgraded to a flat screen at some point which will then get cheaper until it’s upgraded to a holographic set which will then get cheaper – and so on

How many other items are there on the CPI which get removed for the new standard

Computers – mp3 payers – vibrators – mobile phones

ive listed the items from the governments website in my first post , a\s you can see tv;s are on it

Share this post


Link to post
Share on other sites

ive listed the items from the governments website in my first post , a\s you can see tv;s are on it

Homeless. I have to say that I agree with you. "CPI" inflation looks to be quite low when you look around.

However, the cost of housing oneself (mortgages, council tax) has shot up.

Share this post


Link to post
Share on other sites

ive listed the items from the governments website in my first post , a\s you can see tv;s are on it

I was trying to tell the difference between a tube TV and a TFT TV – which type are they on at the moment

Share this post


Link to post
Share on other sites

I dont understand it though...public transport has goes up by double figures most years, fuel bills - nuff said...how can these not affect inflation more?

That must be what has kept "CPI" inflation stable. Airfares, basic groceries, electronic goods etc have fallen over recent years.

And, dare I say it, rents .....

Edited by karhu

Share this post


Link to post
Share on other sites

That must be what has kept "CPI" inflation stable. Airfares, basic groceries, electronic goods etc have fallen over recent years.

And, dare I say it, rents .....

Intersting posting going on. Very intrigued by the argument that prices cant go any lower so surely inflation will creep up steadily soon.

Share this post


Link to post
Share on other sites

Intersting posting going on. Very intrigued by the argument that prices cant go any lower so surely inflation will creep up steadily soon.

That's my feeling. The recent rises in commodity prices are going to exacerbate this.

The BoE are presented with the calm before the storm.

My prediction is that a lot of "borderline" companies are going to go bust over the next 12 months. During this time CPI will start to march upwards. However, due to the huge increases in living costs and commodity prices it's going to be very difficult to control this, especially if the £ stays weak with such a huge trade deficit.

Like America, we could see a situation where CPI inflation gets out of control and have to raise interest rates by 4-5% to try to control it.

Once inflation gets into the system a 0.25% increase in IRs is negligable. We have to start talking 1% rises over short periods of time.

Edited by karhu

Share this post


Link to post
Share on other sites

We all know the IRs are completely fabricated *ollocks. I've always thought of a recession or 'bust' as the metaphorical forest fire of financial cycles i.e. it's natural. What we have at the moment, IMHO, is an artificial economy. I can smell the smoke ...... and the bull*hit. Our economy is full of bad news. Has anybody got anything optimistic to report????

Share this post


Link to post
Share on other sites

What I don't get is that if the base rate is set with a view supposedly looking two years ahead, why, with in particular fuel costs spiralling upwards and rates rising worldwide right now, is anyone talking about rate cuts in the UK being at all likely, and why does so much attention seem to be paid to the individual monthly inflation reports when looking at what might happen at the next BOE meeting: do they really believe that the two year trend for inflation is down?

Share this post


Link to post
Share on other sites

Where does the 22% gas price rise just announced by British Gas fit in?

Expect further increases in gas price later this year. This is scenario softening by BG.

They have jacked up the price just as demand is waning and spring is round the conrner. This is to let the new rate set in.

I fully expect a similar size increase just ahead of winter this year, or if supplies are good this time next year.

Share this post


Link to post
Share on other sites

What I don't get is that if the base rate is set with a view supposedly looking two years ahead, why, with in particular fuel costs spiralling upwards and rates rising worldwide right now, is anyone talking about rate cuts in the UK being at all likely, and why does so much attention seem to be paid to the individual monthly inflation reports when looking at what might happen at the next BOE meeting: do they really believe that the two year trend for inflation is down?

The BoE are treading a fine line here. It is so obvious IMO that IRs are on their way up. I think the BoE are taking their last opportunity to give us a glimmer of hope that they could go down once more.

Share this post


Link to post
Share on other sites

I think you under estimate them

I don’t know if the CPI has TV’s

It does.

on it but it will be upgraded to a flat screen at some point which will then get cheaper until it’s upgraded to a holographic set which will then get cheaper – and so on

How many other items are there on the CPI which get removed for the new standard

Computers – mp3 payers – vibrators – mobile phones

Spot on, this (for certain items) is how the figures can be manipulated if you only take into account the changes and not absolute values.

For example, say to measure the home entertainment part of the inflation figures;

- in 1994 a VHS recorder was £300, in 2000 it drops to £100 when it gets removed from the CPI basket, and replaced by DVD player

- in 2000 a DVD player is £300, in 2005 it is £100 when it gets removed from the CPI basket, and replaced by rewritable DVD player

- in 2006 a rewritable DVD player is £300.

1) Whats the official rate of inflation for this item?

2) and whats the actual rate?

My answers unless anyone can convince me otherwise are;

1) -16.7% per year over the 12 years

2) 0% change over 12 years.

Share this post


Link to post
Share on other sites

Spot on, this (for certain items) is how the figures can be manipulated if you only take into account the changes and not absolute values.

1) Whats the official rate of inflation for this item?

2) and whats the actual rate?

My answers unless anyone can convince me otherwise are;

1) -16.7% per year over the 12 years

2) 0% change over 12 years.

You have said it much better than I ever could have

I’m surprised that the CPI is not a minus number

Share this post


Link to post
Share on other sites

i just popped over for a look on the governments site that works out what inflation is in this country.

looking over what constitutes the make up of inflation, it suprises me that there hasint actually been deflation.

Practically everything on the list has for years due to globalisation been going down in price, also responsible is government backed investigations into why we were paying more for items like new vehicles, cd's, music ect ect.

It is very apparent why inflation is so low.below ive put the general items used pasted from the government site to work out inflation.

* FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, service meals and snacks)

* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)

* APPAREL (men's shirts and sweaters, women's dresses, jewelry)

* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)

* MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)

* RECREATION (televisions, pets and pet products, sports equipment, admissions);

* EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);

* OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

Now here is the crunch

I think weve reached a point where none of these can reduce in price anymore, things such as cars and televisions from china were subjected in the last few years to one off reductions, i cannot see where these reductions can come from anymore.These items have obviously had a huge inpact on the cpi.But one off reductions cannot be repeated.

the only way is surely up, unless someone here can explain how these items can be reduced in price further than they have done.It seems to me we have been going through an extraordinary period in history where the countries selling goods and the people creating them has tripled, but it cant triple again to keep prices down.even china cant pay there workers less to create the same goods and infact as the chinese get wealthier the workers demands will grow.I dont think there has ever been a company or society where as the profits grew the people accepted or were subjected to wage decreases,so cant see there being one now.

The great laugh is that the cost of living / inflation doesn't include the cost of PUBLIC transport (just went up 9%, the cost of household energy (22%) the cost of Council Tax/TV Liscence (oops thats not a cost, thats a tax!!!). It getting harder and harder mostly on the back of things the government produces. I don't think its the things. Its the thinks like hiring Bob Killey for whatever ridiculous amount they paid him to write strategy, instead of paying guys to draw a picture of the tube with little marks where the signal boxes are, and a list of the last time they were properly serviced and then pay some more guys to go out there and just fix it. They just don't care BOO HOO.

EDIT:

And of course the cost of accommodation NEVER rates in inflation. Not like you need it or anything.

Edited by Elizabeth

Share this post


Link to post
Share on other sites
Guest muttley

What I don't get is that if the base rate is set with a view supposedly looking two years ahead, why, with in particular fuel costs spiralling upwards and rates rising worldwide right now, is anyone talking about rate cuts in the UK being at all likely, and why does so much attention seem to be paid to the individual monthly inflation reports when looking at what might happen at the next BOE meeting: do they really believe that the two year trend for inflation is down?

I think that is exactly what they believe.

Everybody has a limit to their debt tolerance,and they realise that the debt has to be payed back.The party is over and people will stop spending.The threat to the economy will come from deflation.

Share this post


Link to post
Share on other sites

Where does the 22% gas price rise just announced by British Gas fit in?

Gas isn't in there, only fuel oil. Coz millions of Britons use fuel oil to heat their homes don't they?

frugalista

It does.

Spot on, this (for certain items) is how the figures can be manipulated if you only take into account the changes and not absolute values.

For example, say to measure the home entertainment part of the inflation figures;

- in 1994 a VHS recorder was £300, in 2000 it drops to £100 when it gets removed from the CPI basket, and replaced by DVD player

- in 2000 a DVD player is £300, in 2005 it is £100 when it gets removed from the CPI basket, and replaced by rewritable DVD player

- in 2006 a rewritable DVD player is £300.

1) Whats the official rate of inflation for this item?

2) and whats the actual rate?

My answers unless anyone can convince me otherwise are;

1) -16.7% per year over the 12 years

2) 0% change over 12 years.

Ah, but you are failing to "hedonically adjust".

See, a rewritable DVD player from 2006 is far *better* than a VHS recorder from 1994. It will let you sleep easier at night, you will have more quality time with your loved ones, it will make you feel more fulfilled in your life, you will be full of energy.

You will just be happier with the glorious new rewritable DVD player, much more than you ever were in the bad old VHS days.

Honest. ;)

So, what with being 10 times happier with the rewritable DVD player, at the same nominal price, I make that a deflation of 90%.

You've never had it so good! Adjust! Hedonically!

frugalista

Share this post


Link to post
Share on other sites

Inflation anecdote.

Clearing out a filing cabinet I stumbled across a Draper Tools catalogue. Thought some of the prices looked good so I cross-checked a few prices with the current website - www.drapertools.com

Here's a few examples, these are the first matches that I found just by picking a few items from various pages, no selection, no filtering, the old prices are for prices valid to 28th September 2001:

225 PIECE O RING ASSORTMENT Price then £4.95, price now £10.83

555 PIECE SPLIT PIN ASSORTMENT Price then £4.95, price now £10.24

600MM 1/4“ BSP AIR LINE WHIP HOSE Price then £4.50, price now £7.21

11.5M X 1/4“ BSP HEAVY DUTY NYLON RECOIL AIR HOSE Price then £17.50, price now £30.24

3 RUNG FOLDING STEP LADDER Price then £45.00, price now £78.30

16 TOOTH CONTRACTORS TARMAC RAKE WITH ASH HANDLE Price then £16.95, price now £27.73

FLOOR STANDING PARTS & COMPONENTS WASHER Price then £109.00, price now £198.73

1 TONNE ENGINE CRANE Price then £210, price now £340.82

Maybe it is just Draper? :unsure:

Share this post


Link to post
Share on other sites

3% annual inflation should be 16% compounded over 5 years.

In that case ladder should cost about £52.

Edited by karhu

Share this post


Link to post
Share on other sites

Ah, but you are failing to "hedonically adjust".

You will just be happier with the glorious new rewritable DVD player, much more than you ever were in the bad old VHS days.

Honest. ;)

So, what with being 10 times happier with the rewritable DVD player, at the same nominal price, I make that a deflation of 90%.

You've never had it so good! Adjust! Hedonically!

frugalista

My hairy **** :lol:

Thanks frugalista.. is my memory correct in that you also work in electronic industry?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.