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C P I: "understating The Effect Of Higher Utility Bills"

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http://www.telegraph.co.uk/money/main.jhtm.../16/cncpi16.xml

CPI controversy fuelled by rising inflation

By Edmund Conway, Economics Editor
(Filed: 16/08/2006)
The controversy surrounding the Consumer Price Index (CPI) has taken a new turn as the Office for National Statistics said its measure of inflation fell last month, despite electricity and gas prices rising at the fastest rate in over 26 years.
Figures from the ONS have also shown that it is
understating the effect of higher utility bills
on the overall inflation number. The amount of weighting given to gas bills in its inflation calculations has risen by only 17pc since 2003 while the actual cost of gas bills has rocketed by 64pc.
The news will fuel calls on the ONS to reconsider the way it calculates how much weighting it gives to each component in the measure.
Experts warned that the
official inflation measure masked
the fact that pensioners' cost of living is rising faster than for other members of the population.

Gordon's attempts to mask the truth may be hatching a backlash in the form of loss of credibility. The "Miracle Economy" is starting to show what's behind the smoke and mirrors. Can we believe any of the Government's statistics or the VIs ramping that house prices can avoid a crash?

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Well done Edmund,

Dig a little deeper and look across the board at the weightings and then try and tie up the figures with what an average consumer is more likely to spend their money on, run a poll, dig out some expenditure stats and see what you get.

About time the press exposed this fraud for what it is.

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About time the main press picked up on this.

I think most people are feeling the pinch, but they probably think it is down to them, not the fiddled CPI. When they start to realise that the data is fiddled, they will start to get stroppy and then we will get higher wage demands.

The problem then will be getting people to lower their expectations back in line with something they no long believe.

The future just keeps looking blacker and blacker......

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http://business.timesonline.co.uk/article/...2314953,00.html

The Times August 16, 2006

Inflation falls in spite of soaring electricity bills
By Gary Duncan, Economics Editor
RECORD-breaking year-on-year increases in household gas and electricity bills last month failed to prevent inflation falling back from June’s nine-year highs as big discounts in summer sales flattered the figures.
Headline inflation on the consumer price index (CPI) dipped to an annual rate of 2.4 per cent in July, down from the previous month’s high of 2.5 per cent but still well above the Bank of England’s 2 per cent target.
The easing in inflation came despite persistent upward pressures from steep increases in utility bills still being phased in last month, which left these household costs rising at an annual pace of 10 per cent, the fastest in nearly a decade and a half. Domestic electricity costs last month were up 25.9 per cent from a year earlier, in their steepest gain since May 1981, detailed retail price index data showed. Gas bills rose still more sharply, by 37.1 per cent year-on-year — the steepest annual increase since 1963.
Food prices were also up sharply in July, partly because of the month’s sizzling temperatures. Food price inflation leapt to an annual rate of 3.1 per cent, from just 1.8 per cent in June, reaching its highest for 4½ years.
The hefty impact from utilities’ charges and food prices was offset, however, by the effect of high street price cuts as retailers sought to tempt consumers to spend at the sales.

Times appears to be towing the NuLabour line by not questioning the credibility of Gordon's trick CPI basket.

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http://www.telegraph.co.uk/money/main.jhtm.../16/cncpi16.xml

CPI controversy fuelled by rising inflation

By Edmund Conway, Economics Editor
(Filed: 16/08/2006)
The controversy surrounding the Consumer Price Index (CPI) has taken a new turn as the Office for National Statistics said its measure of inflation fell last month, despite electricity and gas prices rising at the fastest rate in over 26 years.
Figures from the ONS have also shown that it is
understating the effect of higher utility bills
on the overall inflation number. The amount of weighting given to gas bills in its inflation calculations has risen by only 17pc since 2003 while the actual cost of gas bills has rocketed by 64pc.
The news will fuel calls on the ONS to reconsider the way it calculates how much weighting it gives to each component in the measure.
Experts warned that the
official inflation measure masked
the fact that pensioners' cost of living is rising faster than for other members of the population.

Gordon's attempts to mask the truth may be hatching a backlash in the form of loss of credibility. The "Miracle Economy" is starting to show what's behind the smoke and mirrors. Can we believe any of the Government's statistics or the VIs ramping that house prices can avoid a crash?

It's a foolish game that will result in people dismissing the CPI measure.

This will mean that it will be ignored during pay reviews as people will dismiss it as a valid basis for a pay rise and totally insufficient.

This will mean people demanding higher pay rises, not content with a CPI rise and will result in run away wage inflation which will be hard for the BoE to contain using their interest rate tool to combat an inflation measure that everyone had dismissed.

runaway wage inflation is hard to control once it starts as the wage inflation will feed into inflation and this can easily spriral out of control.

The BoE should know this and should have acted earlier. They will pay the price when they are forced to raise rates higher and faster.

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  • 301 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%



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