RPICPI User Group

last person joined: one month ago 

To foster co-operation and the exchange of information between the ONS, its advisory bodies and other users. Please see 'Aims of the RPI/CPI User Group' in the library for further details.

EVENT - The Future of the Retail Prices Index (RPI)

  • 1.  EVENT - The Future of the Retail Prices Index (RPI)

    Posted 11-05-2018 15:41

    The Future of the Retail Prices Index (RPI)

     

     

    RSS events

    Wednesday 13 June 2018, 06:00pm

     

    Location Royal Statistical Society, 12 Errol Street, London EC1Y 8LX (An alternative venue may be used if demand requires it)

    The Royal Statistical Society will be staging an early evening meeting to discuss 'The Future of the Retail Prices Index (RPI)'.

     

    We are delighted that this discussion will be started by the UK's National Statistician (John Pullinger CStat).

     

    A limited number of speaking slots, from the lectern, will be available for those who have particular expertise in RPI-related issues and who would like to follow John Pullinger in addressing the meeting. If you are interested in contributing to the discussion in this way, please email policy@rss.org.uk as soon as possible; thank you.

     

    Further details about the event, and how you can get involved in this important debate, will be sent asap to all those who register below. 

     

    Those who are unable to attend the meeting itself but still interested in contributing, via a written submission, are also asked to email policy@rss.org.uk

    (Please note that this meeting will be recorded and written contributions will be published on the RSS website.) 

     

    Please arrive at around 5.45pm when refreshments will be available and there will be post-meeting drinks to continue the discussion

    Organiser Name Iain Wilton

    Email Address policy@rss.org.uk

    Organising Group(s) Royal Statistical Society



    ------------------------------
    Tony Cox
    chair, RPI CPI User Group
    ------------------------------


  • 2.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 06-06-2018 23:51
    Do not forget to register for this event next Wednesday!  It promises to be a very lively meeting with hot debate on the RPI, whether it should remain "frozen" and what its future is. See Tony's post below for details. John Pullinger, the National Statistician will set out his views on the future and we expect some challenges to that from some of the confirmed speakers. Now that the government has confirmed that there will not, at least for the moment, be a statutory override to the use of RPI in pension schemes and following a number of court cases which have confirmed the use of RPI for certain schemes is it really right that only routine changes should be applied to it?  But what should happen?  Come and listen and join in the debate. See details below. The meeting will start at 6pm sharp and is expected to last until about 7.45 pm following which the discussion can continue informally over drinks.

    ------------------------------
    Jill Leyland
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  • 3.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 07-06-2018 16:31
    In reference to my posting of a week ago I now attach two documents in support of the views expressed.  These relate to the Generalised Mean and the User Cost to OOH costs.

    In retrospect, I think the interest rate should be longer dated (perhaps 10 years).

    GJ

    Attachment(s)

    pdf
    Generalised mean.pdf   2.48MB 1 version


  • 4.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 11-06-2018 21:26

    Thank you, Tony. Sorry, I won't be able to attend the meeting but I added two files related to it to the Library.

    Best regards,

    Andrew




  • 5.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 12-06-2018 09:22
    I have put together a little video that some may find of interest. It is only about a minute and a half.

    https://youtu.be/Cv9EAP9trzI

    It is one of a series I am doing.

    ------------------------------
    AL

    how the US CPI actually worked to contain housing inflation

    http://www.localisewestmidlands.org.uk/2012/housing-reflation-and-housing-inflation-alternative-inflation/
    ------------------------------



  • 6.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 25-06-2018 12:00

    Please see below links, provided by Louise Whatham, Policy and Research Manager at the Royal Statistical Society, to the 13th June RSS event, "The Future of the Retail Prices Index (RPI)"

    1.  Link to the video from the 13th of June RPI evening event:

    https://www.youtube.com/watch?v=mq4ATbhZrVY

    2. Link to the website with the written submissions received so far:

    https://events.rss.org.uk/rss/frontend/reg/tOtherPage.csp?pageID=71619&ef_sel_menu=1397&eventID=217



    ------------------------------
    Tony Cox
    chair, RPI CPI User Group
    ------------------------------



  • 7.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 26-06-2018 19:08
    "Not me gov"

    This is the message I get from ONS' presentation.

    I have heard a lot of rubbish from ONS before this, but this is the ultimate of denial of responsibility for the current RPI/CPI mess.

    I have more to say - this is just a first instalment.

    GJ



  • 8.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 27-06-2018 13:33
    According to Chris Giles, there is a 50 year issue of rpi linked gilts from 2018 to 2068.

    Also he asserts that this issue is subject to the guarantee that no substantial change to the RPI that dis-advantages holders will be allowed by the B0E.  According to my information, the last  issue with this guarantee matures in 2030.

    Could he please provide evidence of his assertion.

    GJ


  • 9.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 28-06-2018 17:34
    Use Cases

    The National statistician places a lot of faith in so-called Use Cases.  I suspect this derives from the IT world where modern programming techniques use this approach.

    It has always been a problem with IT developments and it is even worse outside of the IT sphere.

    Use cases tend to lead to multiple versions of the same thing, which are often not much different from each other.

    In the RPI/CPI debate Use Cases result in several different measures of the same thing, when what people really want is a single definitive version of inflation which they can use regardless.  That does not prevent breakdowns of the inflation total to suit different groups, but the methodology should be the same in all case.  So, for example, we used to have the RPI as the prime measure, but with RPIX to exclude mortgage interest, and the Rossi index and two different pensioner indices for different purposes, though I don' think they were used much.

    What people usually want is an overall average.  For example, what is the use case for indexed investments?

    Use Cases seem to me to be a way of muddying the waters so that no real solution has to be found.

    GJ



  • 10.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 01-07-2018 13:18
    Transitivity or otherwise of price indices.

    The National statistician makes a lot of the fact that the arithmetic mean does not satisfy the transitivity "axiom" (one person's axiom is another person's mantra - nothing to do with scientific evidence).  Price bounce is a related issue to that of transitivity.

    I have a number of points to make about this:

    a)  The weighted arithmetic mean (used by both RPI and CPI at all levels except the elementary aggregate level) is also not transitive.  So the CPI and CPIH do not satisfy this axiom.

    b)  Transitivity is only of significance when chain linking is used.  The less chain linking the better, from this viewpoint.  The RPI chain links once a year and the CPI and CPIH twice a year.  So is the RPI therefore better than both CPI and CPIH?

    c)  Whenever any axiom is being considered, it is the extent of deviation from the axiom which matters.  If the deviation is small then other considerations are of much greater importance.

    d) Lack of transitivity translates into one of the parts of chain drift (which is a problem associated with chain linking).  I therefore refer you to Mark Courtney's contribution to this debate.  He in turn refers to work done by me showing that the difference in chain drift between the RPI and CPI is at most 0.02% per annum.  It should not be assumed that the RPI has more chain drift than the CPI, but simply that the difference between the two is very small.

    e)  When axiomatic differences are so small, attention needs to given to more significant issues.  Why is the formula effect around 1% per year?  Why do OOH costs make so much difference, at least at some stages of the economic cycle?

    These are the real questions which need to be answered and the NS has no answers.

    To reduce chain drift the solution is to reduce chain linking (i.e. make it less frequent).  A few countries use monthly chain linking which is a disastrous approach as it maximises chain drift.  The UK is somewhere in the mid range, with annual chain linking for RPI  and 2 chain links ( in consecutive months) for CPI and CPIH.  A number of countries chain link every two years and some less frequently than that (e.g. 5 years).  The UK National Accounts used to be chain linked every 5 years, but are now chain linked annually.

    The month in which chain linking takes place is also significant.  The RPI chain links in January and the CPI in both January and February.  The issue here is when data becomes available.  A single chain link in February would certainly improve the CPI and CPIH.  The other significant improvement would be to chain link every two years rather than annually.

    Chain linking has a very detrimental effect in the short term but is eventually necessary to maintain relevance of the index.  The bias arising (chain drift) seems to increase exponentially with frequency (this is probably because the trend in prices in almost always in the same direction).  So a chain link every two years seems a good compromise, especially if it is delayed until data is available (which at present means Feb at the earliest).

    GJ


  • 11.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 03-07-2018 12:51
    Impact of chain linking on quality control

    I would like to add to a point that has been made by Arthur Barnett on several occasions.

    At the annual chain link point there is usually (though not always) an upwards discontinuity in the average price level.    Chain-inking removes the discontinuity.

    However, the question is whether the removal of the discontinuity is a genuine quality adjustment or removal of what had been a downward bias since the previous chain link.

    In my view it is a combination of the two.  However, even this implies a downward bias in inflation measurement.

    GJ


  • 12.  RE: EVENT - The Future of the Retail Prices Index (RPI)

    Posted 04-07-2018 09:15

    Contrary to popular belief, quality improvement usually causes a downward bias in a price index rather than an upward bias.  As long as precisely the same item is available, its price wil be collected.  Suppose that it is now replaced by a new, higher quality product at a higher price.  Usually, part of the price rise is genuinely due to a quality improvement and part is an actual price rise.  It is assumed by critics that the change of quality is ignored and the price change wrongly recorded in full.  In fact, it is more likely that the price change will be attributed entirely to quality improvement, although this is rarely correct.