Tuesday, August 12, 2008

Inflation 'Spinning' Out Of Control

The government's own official and well-spun inflation figure is hitting 4.4%, craftily masking the true rise. Things must be really getting bad for the economy.

The UK's annual rate of inflation rose to 4.4% in July, up from 3.8% in June, as measured by the government's consumer price index (CPI).

The CPI is a neat little device used to set inflation at whatever the government wants it to be - usually around 3%.

It works by taking anything that's a huge inflation buster out of the equation - and then, a cunning weighting is dropped in to make those final tweaks and adjustments.

CPI inflation figures are kept artificially low by the government, because they fix public-sector pay rises, regardless of the obvious huge hike in food and fuel bills. 

Inflation used to be measured by the retail price index (RPI) - but New Labour ditched that in 2003.

The CPI may be a less effective measure of price rises than the old RPI, but it's much easier to manipulate. A point made repeatedly by the Conservatives.

The jump in inflation from 3.8% to 4.4% was the biggest monthly change in the annual CPI rate since records began in 1997.

More holiday reading for beleaguered Brown and his doomed chancellor, Alistair Darling. 

1 comment:

Anonymous said...

I can't agree more. The real rate of inflation will really hit home as inflation starts to outstrip wage growth.

With food costs rising at current rates, its time to start that diet!