RPICPI User Group

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1.  CPIH still showing smaller annual increase than CPI

Posted 25-03-2014 15:33
If  a CPI with owner-occupation of housing was properly working I would not expect to be finding it suggesting that inflation on that basis was less than that without.

I imagine the 2014 weights are in use now  which have increased the OOH weight by about a third.

One of the supposed disadvantages of using Rental Equivalence to capture OOH is that its impact is to reflect rental costs rather than capital costs.

However, in the weights for the CPI-H, there was a sort of spike in the weights for actual rentals in 2012, but there was no significant change in OOH weight until this year. 

I imagine these sort of problems are a consequence of using national accounts to derive these weights. And to me the need to move away from such an index becomes even clearer with these revisions.


2.  RE: CPIH still showing smaller annual increase than CPI

Posted 17-05-2014 13:43

People might be interested in this recent piece in the FT highlighting their concerns about confusion over inflation in the UK.



3.  RE: CPIH still showing smaller annual increase than CPI

Posted 18-05-2014 13:31

Dear Andrew:

Thank you for the link. I hadn't seen that article.

You and others in the group may be interested in a comment I left covering another FT piece by Chris Giles and colleagues related to the May Inflation Report, "Carney seeks to dampen expectations of an imminent rate rise", May 14:


As a Canadian, it has always been a mystery to me how Governor Carney has been allowed to just jettison the baggage of nine years working in senior positions in the Bank of Canada and Department of Finance during all of which time he favoured maintaining the CPI All-items as the target inflation indicator, which has housing prices in it, and now has started a new career on Threadneedle Street as the high priest for keeping housing prices out of the BoE's inflation measure. Was he really so ignorant that he didn't realize house prices were in the Canadian index all that time?

Maybe those journalists don't realize that whereas the Governor of the Bank of England accepts a remit from the Chancellor of the Exchequer that may, as in 1997, redefine the inflation indicator, the Governor of the Bank of Canada negotiates renewal agreements for inflation control every five years with the Department of Finance that may make similar changes. The impression is often left that it is the Governor of the Bank of Canada alone who decides, a misconception that the government of the day is usually happy to perpetuate it, as it gets them off the hook for any defects there may exist, but this isn't the reality. Governor John Crow didn't stand for a second term because the Minister of Finance, Paul Martin, refused to consider a lowering of the inflation target below 2% in the 1993 renewal agreement.

In any case, Governor Carney had a duty and a responsibility to change the target inflation indicator in the 2011 renewal agreement to exclude house prices if he didn't believe it was appropriate. The same goes for the operational guide, the core CPI, whose index for owner-occupied housing crudely approximates an index based on the net acquisitions approach as recommended by Eurostat. He changed nothing. Therefore, presumably he believed then that it was appropriate to include house prices in an inflation indicator, and he should be made to explain why he seems to hold such different views now.

4.  RE: CPIH still showing smaller annual increase than CPI

Posted 21-05-2014 12:43

Air fares have been the mover of the CPI yet again.

Yet again the current housing boom bubble makes no impact on it or even the CPIH.


enough said.


5.  RE: CPIH still showing smaller annual increase than CPI

Posted 21-05-2014 23:38
Hi All

Does the Royal Statistical Society have the power to call the National Statistician and what was CPAC (Consumer Prices Advisory Committee) over their disastrous choice to put rental equivalence in the CPIH?

Those wondering why I feel so strongly will see why from the latest monthly data from the UK ONS.

"The Consumer Prices Index (CPI) grew by 1.8% in the year to April 2014, up from 1.6% in March.

The all items CPIH annual rate is 1.6%, up from 1.5% in March."

So as estimates of house price rises range between 7% and 10% we apparently get a lower rate of inflation by adding housing costs into the mix! Why? Using rental equivalence gives us this.

"The OOH component annual rate is 0.9%"

The situation is also getting worse as the gap is widening.

This is simply not defensible and it is only the fact that it is not more widely known that stops it from being regarded around the country as a laughing stock. 


Shaun Richards

6.  RE: CPIH still showing smaller annual increase than CPI

Posted 24-05-2014 14:14

Given how the latest official house price figures seem to come out now on the same day as the blindly oblivious CPIs I think the public are drawing their own conclusions.

When this silly period comes to be looked back upon, informed people are going to be wondering what the so called 'Tripartite Committee' was/was not doing about these increasignly incredible statistics.

And when we have a new stakeholder based advisory committee with an independant chair of standing, one of the first things I will ask them is if they can tell us what this mysterious committee was doing during this period, and has this committee been helping or hampering the problems, so many of us see, being addressed.

I think this would be a good early test of the new system.