Tuesday, February 17, 2009

Latest official inflation stats

UK inflation rate declines to 3%

Consumer price inflation (CPI) fell in January to an annual rate of 3%, down from 3.1% in December, official figures have shown. The decline is less than expected - the consensus forecast was for an annual rate of 2.7%. Prices continued to fall during the month as shops discounted heavily to try to entice wary consumers back into the shops. The headline Retail Prices Index (RPI) fell to 0.1% from December's 0.9%.

Posted by jack c @ 09:43 AM (1283 views)
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18 thoughts on “Latest official inflation stats

  • Funny that. The rate of decline is always ‘less than expected’. Still, inflation is only 50% above target now, so the recent swingeing rate cuts were completely justified.

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  • Has someone been pulling my whatsit about deflation or is it a very slow process?

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  • I can only assume the falling pound has had its effect……

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  • Where oh where does the BBC pull these quotes from “Inflation has now fallen for four straight months from a high of 5.2% in September, driven down by falls in energy costs and fuel prices”. My engery bills are still extortionate, have not reduce one penny. Fuel prices have gone up in the last few weeks due to the fact that oil is priced in dollars and the exchange rates have fallen. So the falling pound has had the effect of increasing fuel prices!

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  • The decline is less than expected – the consensus forecast was for an annual rate of 2.7%.

    When the “experts” get a forecast correct, I’ll fly to the moon without a rocket!

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  • Makes more sense if you look at the raw numbers. We have been experiencing deflation since September.

    Date CPI Index RPI Index
    15/01/2008 105.5 209.8
    15/02/2008 106.3 211.4
    15/03/2008 106.7 212.1
    15/04/2008 107.6 214
    15/05/2008 108.3 215.1
    15/06/2008 109 216.8
    15/07/2008 109 216.5
    15/08/2008 109.7 217.2
    15/09/2008 110.3 218.4
    15/10/2008 110 217.7
    15/11/2008 109.9 216
    15/12/2008 109.5 212.9
    15/01/2009 108.7 210.1

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  • Sorry about the formatting. Noob poster with little html experience.

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  • refusetobuy – Is that not reduced inflation rather that deflation?

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  • landofconfusion says:

    “Makes more sense if you look at the raw numbers. We have been experiencing deflation since September.”

    Maybe I’m just thick but isn’t inflation/deflation calculated over a whole year? In which case:

    15/01/2008 105.5 209.8
    15/01/2009 108.7 210.1

    means that we still have net inflation.

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  • It’s all working out nicely for the Gov but not for the lowest paid.
    Public spending (on public sector pay, pensions and other benefits) is linked to RPI so that will save a few bob. Meanwhile the price of basics such as food, gas and electric is still extortionate but is gradually dropping out of the equation (for the year on year calculation).

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  • Those numbers are from the RPI and CPI index.

    Inflation/deflation is the return on this index, so landofconfusion is correct. 210.1/209.8=1.0014 so RPI is 0.14% for the year, a net increase. But this will quickly reverse.

    You don’t have to look at a year, if you look at 6 months then the numbers give deflation of -3% over 6 months, or -5.8% annualised.

    This is exactly the same as when calculating house price changes. We could see the decline from the index, but the Year-on-Year figures were still positive.

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  • musn't grumble says:

    Hmmm – thank goodness my pay settlement was based on the month when the RPI figure hit it’s maximum – September 2008 I think it was. Makes up for all the savings interest I’ve lost due to the government’s panic frop in BoE rate.

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  • But does anyone seriously believe the figure?

    No-one seriously believed the inflation figure on the way up, and I am most certainly not going to start believing them now!

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  • Yes, but the BoE believe them. Thats what’s important and that’s why there is all the QE talk. 3% drop in RPI over 6 months is very scary for the BoE.

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  • refusetobuy — you can’t really look at the 3 month numbers, extrapolate them to a year, and proclaim deflation. By January of next year, the artificial reduction in VAT will be reversed and the numbers will pop back up. This sadly all so predictable from the Bank of England — ignore RPI all together as it goes through the roof due to their own negligence, and now that house prices are falling, try to turn it into an unofficial policy target. So much for an independent and credible central bank.

    There might very well be massive deflation of asset prices in the near future, but all of this talk of general price declines is nothing but spin meant to bail out over-indebted property speculators by goading the Bank of England into unleashing massive inflation in consumer prices. Look at the price of petrol. Down 15%, while the international price of oil has fallen by 70%. Look at the price of food. Up 10%. The price of cars is going up, even as the industry collapses. Inflation is not a freebie. People in the UK are demonstrably poorer due to the zero interest rate policy of the Bank of England.

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  • it_is_going_with_a_bang says:

    Can I assume from all this that this years council tax will be restricted to say 1%. Or will it as usual be around 5% +.
    Need I even ask.

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  • Yep, cash is still pretty worthless!
    If QE is embarked upon fairly quickly then we may not enter a deflationary cycle at all, however, I would still say deflation is a distinct possibility but the cycle won’t be too deep.

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  • refusetobuy / hpwatcher / musn’tgrumble:

    The thing about these numbers is that the shorter the horizon the more noise there is
    – maybe over the course of Monday no net prices change occurred, so annualised inflation = 0%
    – maybe today the only net change was that the price of electricity tripled (this isn’t overly unrealistic by the way), so now annualised inflation = 10%
    The trouble is that when the financial machine is spluttering so the short term data must be analysed, this can lead to error compounding. Quite scary!

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