Tuesday, April 21, 2009

Inflation? Nothing to see here, move along now.

Inflation measure turns negative Tomatoes being weighed

Annual inflation measured by the Retail Prices Index (RPI) went negative in March for the first time since 1960, to -0.4%, down from zero in February.

Posted by flintster1994 @ 09:42 AM (2563 views)
Please complete the required fields.



26 thoughts on “Inflation? Nothing to see here, move along now.

  • flintster1994 says:

    LOL!

    Think I must have accidentally highlighted the tomatoes image.

    Reply
    Please complete the required fields.



  • Funny – the BBC never cared much for the RPI a year ago …

    Reply
    Please complete the required fields.



  • Right on Paul.

    Funny how RPI has suddenly become more important han CPI which until they change it is what the Bank of England measures inflation by and supposedly sets interest rates against.

    Reply
    Please complete the required fields.



  • I don’t see any conspiracy in this – RPI has a big impact on government finances during a recession because benefits, pensions etc. are generally liked to RPI not CPI.

    Reply
    Please complete the required fields.



  • happy mondays says:

    So the cost of living is getting cheaper! tell that to the unemployed or the average or below average income family ..

    Reply
    Please complete the required fields.



  • Date RPI CPI PPI
    02/2008 211.4 106.3 108.9
    03/2008 212.1 106.7 110.1
    04/2008 214 107.6 111.7
    05/2008 215.1 108.3 113.9
    06/2008 216.8 109 114.8
    07/2008 216.5 109 115.4
    08/2008 217.2 109.7 114.6
    09/2008 218.4 110.3 114.3
    10/2008 217.7 110 113.1
    11/2008 216 109.9 112.1
    12/2008 212.9 109.5 112.1
    01/2009 210.1 108.7 112.2
    02/2009 211.4 109.6 112.2
    03/2009 211.3 109.8 112.3

    Reply
    Please complete the required fields.



  • PPI will turn negative soon.
    It would take a while for CPI to turn negative

    Reply
    Please complete the required fields.



  • I thought most pensioners were more concerned about the cost of food than about the cost of mortgages, so why RPI rather than CPI for them?

    Reply
    Please complete the required fields.



  • @icarus

    CPI has only been measure recently. Pension agreements have been linked to RPI for much longer. As for changinging, there used to be a big argument about whether they should be linked to earnings instead. The arguments just depend on what measure looks best at the time.

    Reply
    Please complete the required fields.



  • matt_the_hat says:

    Another 40 years of this and my student loan will be no more – or more likely max{0,RPI}, never mind

    Reply
    Please complete the required fields.



  • Keep bringing in the low wage slaves from overseas and let inflation on everything else rip. No worries!

    Super rich and poor divide is in very good health. Wage inflation is what we need to get these cheats to get there act together.

    That’s why British jobs for British people is just another bit of Brown spin.

    Reply
    Please complete the required fields.



  • george monsoon says:

    Nope.. I have no idea who or how they work out the RPI, and I really don’t give a flying ****

    There is not one item or service that I pay for that has fallen in price in the last 12 months. I don’t have a mortgage so I guess it must be the mortgage figures that have skewed this measure.

    Reply
    Please complete the required fields.



  • sold 2 rent 1 says:

    Negative RPI in 1960 turned to rampant inflation 20 years later.

    With change happening 20 times faster, expect the rampant inflation to be here in 2010.

    Reply
    Please complete the required fields.



  • happy mondays says:

    Did i mention that i am buying a 1 bed flat for £120,000…Lol

    Reply
    Please complete the required fields.



  • general congreve says:

    George @12 – I’m with you mate (also no mortgage), not seeing anything else getting cheaper yet. We all know RPI is skewed massively by mortgage payments. Of course RPI will go down if you slash interest rates as viciously as the BoE has. Can’t stay that way forever though, surely? Something is going to give soon, probably a collapse in the bond market, that’ll put the cat amongst the pidgeons.

    Reply
    Please complete the required fields.



  • still renting says:

    @ george monsoon and general congreve

    I guess you guys don’t use petrol (or diesel) then. A year ago petrol was around £1.20 / l, now it’s down to about 92p / l.

    Also, to my chagrin, the price of second hand sports cars has fallen dramatically since I bought mine, almost exactly a year ago.

    Reply
    Please complete the required fields.



  • happy mondays says:

    @ still renting, not for long…

    Reply
    Please complete the required fields.



  • Even without further house price falls, consider the outlook for those who bought into the market for the first time in the last five years, could only afford an interest only mortgage, and are now in negative equity.

    Inflation zeroing out means no prospect of wage rises, so no prospect of affording a repayment mortgage, and no prospect of getting out of negative equity, thereby making it impossible to move house.

    Unless these people are convinced that the fall in the inflation indices is temporary, a growing number will start to contemplate throwing in the towel..

    Reply
    Please complete the required fields.



  • RPIX is 2.2%, and CPI is 2.9%, so we don’t have deflation yet, just falling mortgage bills for existing borrowers on variable rate mortgages. That is a one off drop that will work its way out of the figures in the next 6-10 months, and will be reversed at some point in the future, leading to a large rise in RPI.

    Reply
    Please complete the required fields.



  • little professor says:

    Cyril – the government and the BBC have consistently used CPI as their main inflation measure whilst RPI was running at double the CPI. RPI barely rated a mention.

    See the BBC headlines from 2007, when RPI was running at 4-5% but CPI was around target:

    UK inflation rate lower at 2.7%
    UK inflation rate rises to 2.8%
    UK inflation holds steady at 2.1%
    UK inflation rate eases to 1.8%
    UK inflation rate stays at 1.8%

    They never mentioned RPI in their headlines until now. They even explained why:

    “The government cited three reasons why CPI was a better measure for the purposes of setting monetary policy:

    * it gives a more realistic characterisation of consumer behaviour
    * it gives a better picture of spending patterns in the UK
    * it is a more comparable measure of inflation internationally and represents international best practice.”

    Reply
    Please complete the required fields.



  • Thank you LP
    You backed up my thoughts.

    Reply
    Please complete the required fields.



  • 16. still renting said…@ george monsoon and general congreve

    ”I guess you guys don’t use petrol (or diesel) then. A year ago petrol was around £1.20 / l, now it’s down to about 92p / l.”

    And don’t forget the sub-£200 TV/DVD combo at Tesco, and the electric drill for £7-50!!!! I’ve also just got £7K off the list price of a new Beamer (including free leather upgrade and media package). lol

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    LP, good research.

    Reply
    Please complete the required fields.



  • happy [email protected]: futures crude oil market price took a bit of a beating yesterday, and is down further today. Natural gas futures prices continue to slide, now one third of their peak, but I don’t see any sign of electricity or gas companies cutting their prices yet.

    Reply
    Please complete the required fields.



  • maybe HPC.co.uk could start their own inflation measure?

    I would suggest that the index should be a weighted basket created from a choice of consumer goods (including mortgages / rent / living with parents…), whereupon the baskets are chosen by agents, such that changes to the financial circumstances of the agents affects the basket contents.

    Or does anyone know of a better alternative that already exists?

    Reply
    Please complete the required fields.



  • Now that some big retail names have gone to the wall, those that remain will be looking to rebuild their margins; while niche players, faced with lower sales, will look to increase margins in order to compensate.

    Not only will lower mortgage costs start to come out of RPI in a few months time, but the fall in energy prices will also come out of both indexes.

    On the other hand, my money is on commodity prices steadily rising, with sterling steadily weakening.

    A lot depends on the eurozone, and the policy decisions of the ECB.

    If the eurozone countries, fired by domestic problems, fall out with each other and move toward a break-up; then the euro will fall in value, european exports will become cheaper, and that in turn will soften UK inflation.

    If, on the other hand, the ECB decides that doing nothing is the only way to get agreement, does not print money, and makes a virtue of the euro’s strength (despite the damage to exports) then Sterling will descend to record lows against the euro, fuelling UK inflation.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>