Tuesday, January 29, 2008
Ammunition for CPI-doubters
Posted by David Smith at 10:00 AM
Category: Thoughts and responses

Those who do not like the consumer prices index, the government's target inflation measures - and they include public sector workers (and MPs) now having their pay settled by it - have plenty of ammunition in the ONS's review of 50 years of household spending. It shows the rise in the proportion of household spending on housing, included in the RPI but not, of course, the CPI. Mind you, food has declined in importance. Details here.



The biggest omission, of course, is public sector prices which are not included because the user doesn't pay for them at the point of delivery.

However, the proportion of our GNP spent by the public sector has rise from around 37% to 44% (so a greater proportion of spending isn't included in the figures) and we know that productivity in the public sector has been falling.

I believe the old TPI (taxes and prices index) still exists but even this is unlikely to show the true picture as much of the extra public sector cost has been funded by borrowing, PFI or by not counting pension liabilities.

Posted by: HJHJ at January 29, 2008 01:26 PM

Fear not, for kitchen cupboard inflation is tamed.

Posted by: Piers Ponsenby-Smythe at January 29, 2008 06:45 PM

It's interesting how expectations of inflation over the coming year have risen to a recent high 3.3%. I'm not sure how the questions in the poll are phrased, but I wonder if the rise is due to people thinking that CPI will rise to 3.3%, or just if people have lost faith in CPI at all and are now thinking in terms of what RPI reports.

Posted by: RichB at February 1, 2008 01:54 PM