UK inflation rate turns negative(bbc.com)
bbc.com
UK inflation rate turns negative
http://www.bbc.com/news/business-32793481
82 comments
That is the problem, the ONS office for national statistics was tasked to come up with a new inflation index that did have some element of housing costs CPIH.
Unfortunately the last government didn't like the results and the ONS was to to go away and try again.
Another problem if the basket of goods used has formerly expensive items like DVD players and Computers that over time experience massive price deflation - it skews the figures
Unfortunately the last government didn't like the results and the ONS was to to go away and try again.
Another problem if the basket of goods used has formerly expensive items like DVD players and Computers that over time experience massive price deflation - it skews the figures
The core issue is using irrelevant items.
Any luxuries in the inflation basket immediately means that it is only relevant for the top 50% of the population.
If you are rich then inflation is just annoying. If you are poor then it is catastrophic. So it makes sense to focus on the latter.
Any luxuries in the inflation basket immediately means that it is only relevant for the top 50% of the population.
If you are rich then inflation is just annoying. If you are poor then it is catastrophic. So it makes sense to focus on the latter.
These days a dvd player and a computer are not luxury items (in the UK)
But when they where added to the index they where a lot more expensive than now - which is one sneaky way you can fiddle the inflation figure.
But when they where added to the index they where a lot more expensive than now - which is one sneaky way you can fiddle the inflation figure.
If the vast majority of people, rich and poor, buy consumer electronics, why is it "sneaky" to include them in the inflation basket?
Think about it for a while:
So you deliberately add to the basket of goods a device (that you know will deflate) at say £200 10 years later its now £25.
Makes inflation seem less than it really is.
So you deliberately add to the basket of goods a device (that you know will deflate) at say £200 10 years later its now £25.
Makes inflation seem less than it really is.
By that logic, if you know that the prices of houses will rise, you shouldn't add them to the baskets of goods, otherwise it'll make inflation seem more than it really is.
Whether or not you know it will deflate is irrelevant. The point is these things, which almost all people buy, get cheaper. In fact I'd argue that inflation is grossly over-stated: it doesn't take into account the quality of goods. E.g think computers. Thanks to price drops of many orders of magnitude we have enormous computing resources at our disposal right in the palm of our hands that makes things possible barely imaginable 20 years ago.
Essentially the argument here is that trinkets can make up for a lack of basics.
I think that is fundamentally wrong aside from the few digital nomads that wander internet cafes with their laptops.
DVDs and cell phones and bicycles and such are very cool. No doubt about it. But they are toys. Productivity boosting toys perhaps; but housing is essential... housing isn't just productivity boosting. Without it you cannot own anything you cannot carry on your back.
I would choose a country home with a few books and a log fire over a city flat with a supercomputer. Wouldn't you?
(Hell, if we believe in the market, the fact they are more expensive is a statement that they are indeed more valuable!)
I think that is fundamentally wrong aside from the few digital nomads that wander internet cafes with their laptops.
DVDs and cell phones and bicycles and such are very cool. No doubt about it. But they are toys. Productivity boosting toys perhaps; but housing is essential... housing isn't just productivity boosting. Without it you cannot own anything you cannot carry on your back.
I would choose a country home with a few books and a log fire over a city flat with a supercomputer. Wouldn't you?
(Hell, if we believe in the market, the fact they are more expensive is a statement that they are indeed more valuable!)
Essentially the argument here is that trinkets can make up for a lack of basics.
No, the argument is that the inflation rate is not the same as the cost of living index.
No, the argument is that the inflation rate is not the same as the cost of living index.
Sure. I think that using 'cost of toys' index for inflation and 'cost of living' index not at all is a ridiculous way to go about things.
If the majority of people are at income / wealth levels that mean their personal inflation rate is the cost of living index, then the general rate of inflation should be equal to that. It is literally an expression of what money is worth to the people for whom money is anything more than a metagame token.
(Compare with median vs mean income. Mean income really doesn't mean much, especially if you exclude the unemployed.)
Either that or we really need to reconsider what inflation is used for. The idea of it being used as a sort of way to determine 'real returns' is broken if most of the things people care about are left out of the index or demoted in weighting.
Even a wealthy person does not have 0% inflation in the UK. They are probably buying flats in London or similar, which are going up in price all the time. How is that not inflation? Your money buys less... inflation is (should be) a measure of that.
Toys really do not make up vast proportions of the expenditure of, well, anyone.
If the majority of people are at income / wealth levels that mean their personal inflation rate is the cost of living index, then the general rate of inflation should be equal to that. It is literally an expression of what money is worth to the people for whom money is anything more than a metagame token.
(Compare with median vs mean income. Mean income really doesn't mean much, especially if you exclude the unemployed.)
Either that or we really need to reconsider what inflation is used for. The idea of it being used as a sort of way to determine 'real returns' is broken if most of the things people care about are left out of the index or demoted in weighting.
Even a wealthy person does not have 0% inflation in the UK. They are probably buying flats in London or similar, which are going up in price all the time. How is that not inflation? Your money buys less... inflation is (should be) a measure of that.
Toys really do not make up vast proportions of the expenditure of, well, anyone.
> Toys really do not make up vast proportions of the expenditure of, well, anyone.
Sure, and that's why the basket of goods is weighted according to much of them are purchased
Sure, and that's why the basket of goods is weighted according to much of them are purchased
Comment thread is looping here.
If inflation is 0% then it is not weighting correctly when the vast majority of expenses are rocketing.
That's basically the point. Anyone 'on the ground' that actually tracks their costs knows this very well.
If inflation is 0% then it is not weighting correctly when the vast majority of expenses are rocketing.
That's basically the point. Anyone 'on the ground' that actually tracks their costs knows this very well.
After 50 straight years of inflation, I get amused at the fear mongering that begins with a supposed -0.1% negative inflation rate.
The greatest trick the keynesians ever pulled, was convincing the world that some inflation is healthy, and all deflation is cause for fear.
The greatest trick the keynesians ever pulled, was convincing the world that some inflation is healthy, and all deflation is cause for fear.
My understanding is that a real deflation would crash the current financial system. Savers in fiat are paid interest from money created from debtors taking loans.
In a deflation, the volume of money is reduced. Debtors instead of having their debts inflated away, have their real debts increased. Triggering defaults, triggering destruction of money, triggering further deflation.
Savers don't win by having hoards of cash since their assets are the liabilities of the defaulting debtors - which are going up in puffs of smoke.
For this reason, central banks will run interest rates down to juice more inflation....oh wait...they are already at near zero...
For this reason, central banks will run interest rates down to juice more inflation....oh wait...they are already at near zero...
I guess there is always deficit spending to get things going again...
It can be look at how property prices in Japan crashed negative equity is never a good thing
Japan's real estate bubble crashing had nothing to do with deflation. The claim that it did, is one of the greatest myths in all of economics. They've had zero net deflation on their consumer price index since ~1989.
The US dotcom bubble imploding was also not deflation.
Japan got a real estate bubble from extreme monetary expansion flooding into the economy in the 1970s and 1980s. They got a popped bubble when that fake economic party ended with monetary expansion falling to single digits in the early 1990s. The reduction in that rather massive monetary expansion forced their economy back to reality.
The US real estate bubble occurred in part for the same reason. The Fed juiced the economy after 9/11 to attempt to avoid a recession.
When reality hit, Japan shifted to accumulating vast amounts of debt to fake a better economic condition than what they really had. That overwhelming debt has continued to drown their prospects as the years go by, sapping growth potential.
You can see this same exact scenario playing out in China right now.
A bubble imploding is not deflation, just as price contraction on the CPI is not inherently deflation.
See: flat screen tv prices, computing prices, etc. The US enjoyed decades of general price stability and contraction due to vast automation and economies of scale after the civil war, none of which was deflation (monetary contraction).
The US dotcom bubble imploding was also not deflation.
Japan got a real estate bubble from extreme monetary expansion flooding into the economy in the 1970s and 1980s. They got a popped bubble when that fake economic party ended with monetary expansion falling to single digits in the early 1990s. The reduction in that rather massive monetary expansion forced their economy back to reality.
The US real estate bubble occurred in part for the same reason. The Fed juiced the economy after 9/11 to attempt to avoid a recession.
When reality hit, Japan shifted to accumulating vast amounts of debt to fake a better economic condition than what they really had. That overwhelming debt has continued to drown their prospects as the years go by, sapping growth potential.
You can see this same exact scenario playing out in China right now.
A bubble imploding is not deflation, just as price contraction on the CPI is not inherently deflation.
See: flat screen tv prices, computing prices, etc. The US enjoyed decades of general price stability and contraction due to vast automation and economies of scale after the civil war, none of which was deflation (monetary contraction).
Well, you're correct but the armies of Keynesian economic graduates that roam the streets will have trouble absorbing what you write.
Eventually the stark failure of borrow and spend 'stimulus' policies will get through. Maybe after another few decades of wasted economic opportunity and stagnation.
Eventually the stark failure of borrow and spend 'stimulus' policies will get through. Maybe after another few decades of wasted economic opportunity and stagnation.
Negative equity is a damn sight better than unaffordable housing.
If you live in the UK you get savings deflation and unaffordable housing. It's a win win!
The greatest trick the anti-Keynesians ever pulled was selling governments on the nonsensical belief that sado-monetarism is ever good for anyone who isn't already extremely rich.
The greatest trick the anti-Keynesians ever pulled was selling governments on the nonsensical belief that sado-monetarism is ever good for anyone who isn't already extremely rich.
Sadly, the two appear to be BFFs.
So some properties in japan once crashed after a boom?
As opposed to 80-100 years of devaluation of the money that you earn, save and spend?
A stated above 'the greatest trick the Keynesians ever pulled off was making everyone fear even the slightest deflation, while convincing them that year-in, year-out inflation as not only natural, it was a good thing.
The main benficiaries of inflation are the people who get to spend the newly minted money first - because they get to use created money to buy assets at the valuations for the existing amount of circulation. By the time the inflation works it's way down the chain, your cup of coffee has jumped 50c but you haven't had a commensurate increase in income.
As opposed to 80-100 years of devaluation of the money that you earn, save and spend?
A stated above 'the greatest trick the Keynesians ever pulled off was making everyone fear even the slightest deflation, while convincing them that year-in, year-out inflation as not only natural, it was a good thing.
The main benficiaries of inflation are the people who get to spend the newly minted money first - because they get to use created money to buy assets at the valuations for the existing amount of circulation. By the time the inflation works it's way down the chain, your cup of coffee has jumped 50c but you haven't had a commensurate increase in income.
Crashed very very badly - they had 100+ year mortgages that where handed down from generation to generation.
You can imagine the will reading "I leave my Rolex and and the remaing 40 years of my mortgage to my son/daughter"
You can imagine the will reading "I leave my Rolex and and the remaing 40 years of my mortgage to my son/daughter"
The problems in the UK started a lot earlier than when property prices started climbing. Everybody started getting mortgages for their houses and flats instead of renting something. Credit and debt runs that country more than anywhere else I have seen. People get payday loans for Christ's sake.
That's not a healthy sign, and I don't think that was the fault of "them". Individuals did that.
That's not a healthy sign, and I don't think that was the fault of "them". Individuals did that.
It is a combination.
Policies from the government over the last couple of decades have combined with people's greed, and well we are where we are today.
Individuals are of course to blame too, but it is hard to pin point who got the ball rolling.
Policies from the government over the last couple of decades have combined with people's greed, and well we are where we are today.
Individuals are of course to blame too, but it is hard to pin point who got the ball rolling.
It got a big push from Blair and Brown. Their entire strategy seemed to be to get people to generate as much debt as possible, to raise as much tax revenue as possible to spend on NHS, education, and all that good stuff. To be honest, I'm surprised they managed to keep the racket going for as long as they did.
Why are you attacking mortgages in the same paragraph as payday loans?! They're substantially different things.
Owning your house isn't a bad thing if you can afford it and its value doesn't tank. The buyer is largely responsible for those things. Further, most homeowners treat their homes as an investment. They do what they can and trade up when they can afford [to mortgage] something better. When they retire, they trade down and release 50 years of equity.
Yeah pensioners with money. That sounds horrid.
The UK's housing issues are far more to do with the inadequacy of rents. Soaring rates (underpinned by flat welfare rates). Unfair terms. Agents that lump on their own hidden fees and arbitrary terms. In more than one case in my past, my rent has been substantially more than the equivalent mortgage would have been.
Owning your house isn't a bad thing if you can afford it and its value doesn't tank. The buyer is largely responsible for those things. Further, most homeowners treat their homes as an investment. They do what they can and trade up when they can afford [to mortgage] something better. When they retire, they trade down and release 50 years of equity.
Yeah pensioners with money. That sounds horrid.
The UK's housing issues are far more to do with the inadequacy of rents. Soaring rates (underpinned by flat welfare rates). Unfair terms. Agents that lump on their own hidden fees and arbitrary terms. In more than one case in my past, my rent has been substantially more than the equivalent mortgage would have been.
Because common sense its better to investing in something than pay the same or higher to rent it.
Renting would have to be a LOT! cheaper than owner occupiers to make renting a rational decision.
Renting would have to be a LOT! cheaper than owner occupiers to make renting a rational decision.
Only if your investment is likely to increase in value and you can handle the continuous maintenance costs and you can take the risks associated with ownership and you can take the risks associated with mortgages and you want to tie a rather heavy anchor to your legs.
But if all these are true, then, sure, you should buy your own place.
But if all these are true, then, sure, you should buy your own place.
But in the UK renting is far more expensive and in general the USA's housing is far cheaper for similar area's
Payday loans in the UK have been around for a long time and well before that you have Pawnbrokers
True, but they've never been as prolific as they are now
FT analysis of error in calculating rental costs
http://www.ft.com/cms/s/0/09894118-a899-11e4-bd17-00144feab7...
When housing is 50% of your budget, I really don't see how a "drop in sea fares" is very relevant...
http://www.ft.com/cms/s/0/09894118-a899-11e4-bd17-00144feab7...
When housing is 50% of your budget, I really don't see how a "drop in sea fares" is very relevant...
Nothing except housing is relevant.
Nothing at all.
For a UK citizen buying a home (or renting cheaply and saving) is the thing to do. It is the first step along the way to retirement. It's the only thing that matters.
If housing is cheap we are rich. If housing is expensive we are poor.
Hell, the fact that 'stuff' is getting cheaper may well be because demand is repressed by the fact that everyone is scrambling to pay the rent and has no disposable income.
I maintain that the price of stuff is totally irrelevant. We can live without stuff (regardless of whether the average person actually does). We can't live without shelter.
For a UK citizen buying a home (or renting cheaply and saving) is the thing to do. It is the first step along the way to retirement. It's the only thing that matters.
If housing is cheap we are rich. If housing is expensive we are poor.
Hell, the fact that 'stuff' is getting cheaper may well be because demand is repressed by the fact that everyone is scrambling to pay the rent and has no disposable income.
I maintain that the price of stuff is totally irrelevant. We can live without stuff (regardless of whether the average person actually does). We can't live without shelter.
I'd say food is very relevant for most people, especially since prices have gone up so much in the past 5 years or so. For many their food bill will be the 2nd or 3rd most expensive monthly outlay.
My experience is the opposite. I've never had to worry about food; in fact I'm always amazed at how cheap food is, at least if you stick to economy brands. Rent and heating have always been the big ones for me.
The rise in food banks in recent years would appear to contradict your experience.
If there indeed is a rise. We've only been recording the existence of food banks for the last few years, so the rise could be attributed to the time its taking to catalogue them.
Re posts below:
Food is not expensive. It is expensive when you have already spent all of your money on housing and transport, obviously. (It is about 10% of min wage in UK).
That's kind of the point I'm trying to make; if housing is cheap then inflation is actually a reasonable metric. If it takes up most of your income it is really just a measure of 'how much the things you already cannot afford are increasing by'.
When you have a stable home, spending money is fine! Until you do, every pence spent is just taking you further away from that stability.
Food is not expensive. It is expensive when you have already spent all of your money on housing and transport, obviously. (It is about 10% of min wage in UK).
That's kind of the point I'm trying to make; if housing is cheap then inflation is actually a reasonable metric. If it takes up most of your income it is really just a measure of 'how much the things you already cannot afford are increasing by'.
When you have a stable home, spending money is fine! Until you do, every pence spent is just taking you further away from that stability.
Transport costs for commuters is the other big one
Rent for my 1-bed flat in London zone 3: £19000/year.
Can London really continue to have an interesting tech scene under such circumstances? Tech wages (outside the financial sector) are around £30k-£60k.
Can London really continue to have an interesting tech scene under such circumstances? Tech wages (outside the financial sector) are around £30k-£60k.
Then you are paying way too much. There's lots of smart 2 beds in Putney for the same price - zone 2, close to the high street & shops/mall/supermarket, 5 mins walk from railway (17 mins to waterloo) or tube (20 mins to earls crt, south ken etc)
Whereabouts, specifically? 'Zone 3' varies quite a lot; I recently moved out of a 2-bed flat in zone 3 which was 12K/year. It was a large 2-bed as well: main bedroom could have held 3 double beds, living room was about twice that size, large kitchen (huge by London rental standards) with room for a dining table, garden. Rents are increasing by about £1,000-1,500/year, but that doesn't account for the difference. I suspect you are talking about a pricier part of zone 3.
A quick search on e.g. rightmove.co.uk suggests there are multiple studio flats and one beds in the Shoreditch / "Tech City" area (some in zone 1) in the £14K-£15K pa range. Still not great I know especially on a £30K-£60K pa salary, but significantly cheaper than £19K pa, and the savings could help you start building up a deposit.
Good question. I think it will, but I think other cities will continue to draw talent.
http://www.telegraph.co.uk/finance/yourbusiness/11390230/Bou...
http://www.telegraph.co.uk/finance/yourbusiness/11390230/Bou...
I will venture a guess - it's a nice and refurbished (or newly built) apartment, unlike majority sub-standard quality accommodation in London, thus the price. I am paying more or less the same for a studio in zone 1.
Housing is expensive in London, but £19,000/year (£1,5833/month) is way too much for zone 3. You can find cheaper and closer...
I'm living in zone 2, and rent is £1,300 for one bedroom flat.
I'm living in zone 2, and rent is £1,300 for one bedroom flat.
Agreed. I think what the government meant to say was 'we ignored the thing that is going up in price, so there is no inflation'.
So, how long before we reach a deflation spiral as more and more people hoard their money in hopes that they can buy more stuff for it tomorrow than they can buy today which will totally crash the economy? Just a bit more of this and bitcoin will start to look pretty good!
Name a single deflationary spiral that has happened.
Identify how much spending you can postpone until next year.
Reflect if a deflationary spiral is even remotely likely.
Identify how much spending you can postpone until next year.
Reflect if a deflationary spiral is even remotely likely.
> Name a single deflationary spiral that has happened.
None whatsoever.
> Identify how much spending you can postpone until next year.
Everything except for life's necessities.
> Reflect if a deflationary spiral is even remotely likely.
It isn't but it's an interesting thought experiment.
A world with a large deflation is probably a world in which all natural resources have been harvested and the only things that still flow freely are sunlight and rain.
None whatsoever.
> Identify how much spending you can postpone until next year.
Everything except for life's necessities.
> Reflect if a deflationary spiral is even remotely likely.
It isn't but it's an interesting thought experiment.
A world with a large deflation is probably a world in which all natural resources have been harvested and the only things that still flow freely are sunlight and rain.
The extremely strict monetary policies of German president Hindenburg, a reaction to the hyperinflation of a few years before him, caused a deflationary recession that directly preceded the rise of Hitler.
Uh, is this a trick question? Japan?
Japan is the poster child for the madness of Keynesians.
There was deflation in Japan, caused by deflation of the asset bubbles.
There was no deflationary spiral as defined by the scaremongers.
Japanese banks should have failed, and debt holders should have been wiped out for making bad lending decisions.
Such things are painful but they are forgotten over time.
Instead continual debt increases and government boondoggles have made the economy dead for 20 years.
A resurrected corpse after some hardship is better than a zombie economy.
There was deflation in Japan, caused by deflation of the asset bubbles.
There was no deflationary spiral as defined by the scaremongers.
Japanese banks should have failed, and debt holders should have been wiped out for making bad lending decisions.
Such things are painful but they are forgotten over time.
Instead continual debt increases and government boondoggles have made the economy dead for 20 years.
A resurrected corpse after some hardship is better than a zombie economy.
long read, but he argues that the Japan CPI went up
http://www.financialsensearchive.com/fsu/editorials/amerman/...
Definitely not written by someone living in Japan. Here:
http://www.tradingeconomics.com/japan/inflation-cpi
You can say they have had net inflation if you pick your time range correctly, but the graph shows spurts of deflation followed by spurts of deparate inflation via QE that doesn't solve the deflation.
Google "Japan deflation" today and you'll get articles from yesterday describing how they are still trying to fight this problem.
http://www.tradingeconomics.com/japan/inflation-cpi
You can say they have had net inflation if you pick your time range correctly, but the graph shows spurts of deflation followed by spurts of deparate inflation via QE that doesn't solve the deflation.
Google "Japan deflation" today and you'll get articles from yesterday describing how they are still trying to fight this problem.
will read - thanks
Japan has had zero net deflation in the last 30 years. Their CPI is higher today than it was in 1990 for example.
Here's what Japan had:
1) Too much monetary expansion in the 1970s and 1980s, leading to bubbles in both real estate and the stock market.
2) When monetary expansion slowed down, they suffered the popping of both of those asset bubbles.
3) In response to that fake boom ending, they turned to accumulating debt.
4) That debt has led to protracted stagnation for ~20 years. Which has now led to currency debasement to devalue that debt, because it's consuming so much of their budget, and the the central government can no longer borrow from Japan's savers (because their savings rate is non-existent now).
Here's what Japan had:
1) Too much monetary expansion in the 1970s and 1980s, leading to bubbles in both real estate and the stock market.
2) When monetary expansion slowed down, they suffered the popping of both of those asset bubbles.
3) In response to that fake boom ending, they turned to accumulating debt.
4) That debt has led to protracted stagnation for ~20 years. Which has now led to currency debasement to devalue that debt, because it's consuming so much of their budget, and the the central government can no longer borrow from Japan's savers (because their savings rate is non-existent now).
> people hoard their money in hopes that they can buy more stuff for it tomorrow than they can buy today
The computer and car industries (both manufacturing depreciating assets) seems to have managed over the past decade/century
The computer and car industries (both manufacturing depreciating assets) seems to have managed over the past decade/century
>hoard their money
I'm not sure about you, but I've always called that 'saving'
I'm not sure about you, but I've always called that 'saving'
Right, unless you're stashing currency into your mattress or burying gold bars in the yard, your money hasn't gone anywhere. It's in the bank, which is the lending it out to those who have a a better user for it.
Hoarding is a an invented scary word for saving. Saving is the underpinning of all investment, and investment is the key to productivity gains. Productivity gains are the key to increased living standards.
To then turn that upside down and say that saving makes things worse is only possible by using the word 'hoarding' as it conjures images of a fleeing deposed lord burying the family treasure in a field.
In reality, returning economies to health requires a stable or increasing rate of savings.
To then turn that upside down and say that saving makes things worse is only possible by using the word 'hoarding' as it conjures images of a fleeing deposed lord burying the family treasure in a field.
In reality, returning economies to health requires a stable or increasing rate of savings.
Its more a problem in country's with week banking systems where the population do not trust the banks - look at the outflows of cash from Greece.
agree but would add even the mattress and metal hoarders serve a purpose in signalling that the offer of risk vs reward in current interest rates needs adjustment.
This is all distorted however since the central banks keep their hand on rates and decide what the market should accept for the risk lending savings to the bank (depositing).
The problem is that a Fetishistic obsession with 100% cash savings instead of actually investing in something is not a good thing for the economy.
It also leads to bizarre outcomes where foolish pensioners invest in exotic and risky cash like instrument's like PIBS instead of 100+ year old investment trusts.
It also leads to bizarre outcomes where foolish pensioners invest in exotic and risky cash like instrument's like PIBS instead of 100+ year old investment trusts.
Yes, but you're saving to accumulate an amount with some particular purpose, usually not because your money will theoretically buy you more tomorrow (likely it will buy you less in the normal inflationary version of the world).
Hoarding is something like but not quite exactly the same as saving.
Hoarding is something like but not quite exactly the same as saving.
> usually not because your money will theoretically buy you more tomorrow
Which is a ridiculous argument because it's always true (or at least has been for 100+ years).
It's very easy to find safe investments with greater returns than inflation and it always has been, has it caused a hoarding problem?
Which is a ridiculous argument because it's always true (or at least has been for 100+ years).
It's very easy to find safe investments with greater returns than inflation and it always has been, has it caused a hoarding problem?
> It's very easy to find safe investments with greater returns than inflation and it always has been, has it caused a hoarding problem?
Great returns come with great risk.
Great returns come with great risk.
Yes, but 0.1% over inflation returns come with virtually no risk
Does this include pump prices for fuel?
This. Zero (or negative inflation) today is mostly due to lower oil prices and slower increase, even decrease, in non-processed food prices (at least it's the case in parts of continental Europe). Core inflation, which excludes volatile stuff, in the UK is 0.8%. Although slowly decreasing, it's still well above 0%. Core inflation is here the number that matters.
Both (core and straight inflation) numbers matter, they have different uses. Food and energy costs are important parts of inflation. For some uses it can be interesting to exclude these, yielding an approximation of the inflation with less volatility.
Oil prices for example have been coming down long enough that it's not noise re economic effects any more, so it would be bad to exclude the effect of cheaper oil.
Oil prices for example have been coming down long enough that it's not noise re economic effects any more, so it would be bad to exclude the effect of cheaper oil.
Yes. The ONS maintain an infographic for how they calculate CPI at http://www.ons.gov.uk/ons/infographics/how-cpi-is-calculated...
Well that accounts for the fall then. Pump prices have come down. (Let's not get into whether they've come down in line with world fuel prices.)
also known as deflation.
Apparently it needs to be sustained to be deflation.
Nope, I don't think so. That's just a political talking point.
Chancellor: "Negative inflation is not damaging deflation"
So it's not "damaging deflation", but it's still deflation.
"Economists [...] say proper deflation is a long term term trend of declining prices [...]"
So it's not "proper deflation", but it's still deflation.
We could also s/inflation/negative deflation/ and that would be absolutely correct.
They are avoiding the word for fear of the connotations of a sustained period of deflation. Which will actually make the problem worse, as it sets a precedent for a changed understanding of the word deflation. So next time everyone will be even warier of using the term. Instead they should accustom people to hearing the word without thinking "OMG! WE ARE ALL GOING TO DIE!!1!".
Chancellor: "Negative inflation is not damaging deflation"
So it's not "damaging deflation", but it's still deflation.
"Economists [...] say proper deflation is a long term term trend of declining prices [...]"
So it's not "proper deflation", but it's still deflation.
We could also s/inflation/negative deflation/ and that would be absolutely correct.
They are avoiding the word for fear of the connotations of a sustained period of deflation. Which will actually make the problem worse, as it sets a precedent for a changed understanding of the word deflation. So next time everyone will be even warier of using the term. Instead they should accustom people to hearing the word without thinking "OMG! WE ARE ALL GOING TO DIE!!1!".
not only in the UK
Housing is 50% of my budget. It's 50% of everyone I know's budget, or more. It is most certainly not getting cheaper at all, it is skyrocketing.
I don't care what 'inflation rate' the lucky few that own outright face. Why should I? They have won. They've completed the game. Inflation could run 15% for years and they would still win.
If you are going to define inflation on such a ridiculous basket that it really is irrelevant what the prices move to then don't pretend that it's a useful indicator of anything.