Inflation vs Reality

Discussion in 'Army Pay, Claims & JPA' started by roseandpose, Apr 12, 2006.

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  1. Not strictly an Army Question, but can anyone help?

    Inflation is, currently, around about 3% (near as damn it). When you consider that gas and electricity has gone up by double figures, and insurance, shop prices etc rise by considerably more than 3% pa, I find t difficut to correlate these sums

    Where does the government get this 3% figure from, as it seem not to be borne out by reality.
  2. Headline & Underlying inflation are calculated using a "basket of goods". Basically, they go and price up the goods at a given point and compare it with, say, 12 months ago and bingo - inflation figure.

    Underlying inflation excludes interest payments and is reckoned to be a steadier measure.

    Decent article

    Of course I'd like to know WHO decides what appears in this basket of goods! :wink: Wouldn't be the Government would it?
  3. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

  4. Yes, it is. Part of the Office for National Statistics (ONS) sends out teams throughout the year to visit households in order to record income and expenditure for two weeks. So, after one year (but this has been going on for decades), the items purchased by thousands of families are used to design a typical shopping basket, which is then priced up by other teams working the shops, markets, Internet and supermarkets (some people have wonderful jobs...). The price changes in that shopping basket are then used to calculate the RPI and CPI.

    The RPI includes council tax and the cost of rent or mortgage repayments, and the CPI doesn't, which is one reason why the RPI is consistently higher than the CPI! Guess which Gordon prefers? One of the issues in the future will be how the Government manages the switch from the RPI to the CPI. Imagine how much money the Government of the day could save by switching all calculations of inflation to the CPI!

    One of the advantages of the RPI is that it has been in use now for many years and although one could consider it flawed (fishing rods and mobiles in your shopping basket?), there is nothing else available!

    By the way, the ONS claims to be independent of the Government and answerable only to Parliament. :roll:

  5. Easy to complain about inflation...but...

    -TVs and DVDs are so cheap new you can't even sell one down the pub anymore and this has been suggested as one reason behind the fall in the burglary rate
    -Beer from the supermarket is cheaper than from the offy where you used to have to get it
    -Wine has hardly gone up in the 12 years or so I remember
    -I don't pay for landline telephone calls anymore
    -Broadband has come down and just got a lot chepar yesterday with Talk Talk - local loop unbundling of BT exchanges
    -I've just cut my gas and elec bills by changing supplier
    -You can find the cheapest place to buy something quite easily on the internet rather than either get ripped first place you see on the High St or traipse round for weeks comparing
    -You can buy ridiculously cheap clothes at Asda etc if you really must - more one for the ladies, Top Shop and New Look too - thanks to those all industrious little underpaid Chinese folk
    -Mortgages and credit in general are more competitive and the interest rate currently manageable rather than usurious
    -If you don't mind looking like a tw@t there are various obscure SE Asian cars you can now buy
    -You can get something like 500 free mins on your mobile for a few quid a month
    -Amazon and the like save you a lot of money on books and CDs
    -...whih are in general cheaper than 5 years ago and much chepaer than LPs were 20 years ago
  6. All very true, but most of those are things low down on the priority list for the most worse off in society, eg pensioners and the lowly paid.

    I fully agree with the sentiment of your post, but your average pensioner is more concerned about heating the house over the winter months than the cost of wine and cars. The rise in home heating bills and rises in council tax are having a real impact to the worse off, and in a year where the £200 heating allowance hasnt been paid.
  7. Yes, but most of those items are purchased solely by one or two small segments of a very large population and I note there are now more pensioners than U25s.

    :arrow: For example, neither my father nor I have bought a DVD for some time now - we both have all the music that we want.

    :arrow: We both have broadband which is falling in price (but I note that I spend far more on my overall telephony bill now than I did 10 years ago)!

    :arrow: He doesn't have a mobile and I do, which I use sparingly (no mates, see?...).

    :arrow: Neither of us drinks much (I lie - he drinks whisky as if it was going out of fashion and I buy it).

    :arrow: For my father, the cost of heating and the council tax has rocketed out of all proportion to anything else.

    :arrow: He doesn't drive and I do - 20,000 miles a year. Taxis are expensive but nowhere near the cost of a car, and I note that the real cost of operating a car has fallen over the last 20 years. However, petrol prices are rising again now because of unrest in Nigeria and the Middle East, coupled with rising US interest rates and a falling pound. How soon before the £1 litre becomes commonplace across the country?

    :arrow: I do my own decorating and gardening; he pays for a little man to go round - and the cost of that has rocketed although the cost of materials has fallen.

    :arrow: Yes, interest rates for mortgages and loans are currently low for several good reasons, but there will come a time when Gordon has to choke off the boom that he has stoked. Things will then become interesting as they have already done in Iceland!

    Yes, I take your point. For some people, inflation is fairly minimal, especially if you buy loads of computing gear etc. For others, pensioners in particular, inflation is roaring away.

    As I have already noted elsewhere on this site, this Government has been very lucky in riding a wave of cheap imports and cheap money that has distorted the UK's economy. How long those distortions will take to undermine the financial welfare of the average man in the street is anyone's guess.

  8. Most goods are falling in price these days due to supermarket price wars the 3% inflation rate must be kept to remain part of the EU. Gas bills have rocketed due to the end of the lifespan of northsea gas and the russian gas situation, these however are due to fall in a year or so. Other power prices are due to international oil prices.

    As for insurance that's because the people who run insurance companies are only marginally more moral than the legal industry. The main reason we have less cash is mostly due Mr Brown in number 11 though.
  9. Inflation is calculated using the Comumer Prices Index (CPI) and Retail Prices Index (RPI) with which inflation is calculated is based on a basket of good.

    you can see the list of goods and their weighting at: Link

    Energy prices may be rocketting but cheaper imported goods like clothes from the far-east drive down the basket total.
  10. Point taken with regard to the price rise felt by pensioners. Not sure I understand where the extra council tax goes when there is no obvious corresponding improvement in service. Presumably on pensions and lesbian co-ordinator non-jobs.

    Gas - kind of tough sh1t really. "Put another tartan blanket on granddad!" Seriously though, at least we aren't paying as much extra as the wholesale price has gone up. As has been mentioned, it is supposed to come down again when more capacity comes onstream.

    Pensioners should be benefitting from one thing at least - food prices. Where else can you buy such cheap bread and milk? Not much inflation in this area with Tesco v Asda competition (as long as you don't live where I do where it's Sainsbury...or Sainsbury) plus your German chains. "No need to eat cat food any more granddad".

    They are lucky buggers in many ways; better pensions than most of us will ever have...
  11. Cheap imports try this comparison:

    HD-DVD player
    £1000 in UK
    E1000 in Europe (£750)
    $1000 in US (£552)
  12. The biggest thing that has far, far outstripped inflation in recent years has been the housing market.

    Someone without an existing home or a ton of cash in the bank wants to buy - then they will be way out of pocket compared with buyers in, say, 2000 before the market took off with 20-30% gains a year for the next 4 years.