RPI/CPI User Group

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1.  Problems with the CPIH Inflation Measure

Posted 16-05-2017 18:25
Hi All

So far the CPIH inflation measure is struggling to get much attention in the media. An example of this is how the Financial Times put today's news out on Twitter.

Financial Times on Twitter
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Financial Times on Twitter
UK inflation has surged to a four-year high of 2.7% https://t.co/cA2ymxzsyN
View this on Twitter >

Also the BBC declared it like this online.

"

The UK's inflation rate rose last month to its highest since September 2013, official figures show.

Inflation now stands at 2.7% - up from 2.3% in March - and above the Bank of England's 2% target."

So both have ignored the new measure ( CPIH ) and stuck with the previous CPI in a clear fail for the ONS strategy. Perhaps people are getting more wary of inflation measures that always seem to give a lower reading! Also I think that the message that the new index is based on a type of fantasy economics measure basing housing costs on rents that are never paid got home.

Actually I note the BBC still states RPI inflation presumably on the grounds that it is still in wide use. Much wider use than CPIH.

Even a past supporter - readers may recall Chris Giles's time on CPAC and his talk at the RSS- seems not longer to be keeping the faith.

"I have to say. Having the decide the headline measure is CPIH when no one uses it is just as irritating as I imagined it would be"

I do hope the Office for Statistics Regulation is watching all of this...

Regards

Shaun Richards

https://notayesmanseconomics.wordpress.com



2.  RE: Problems with the CPIH Inflation Measure

Posted 17-05-2017 09:57

Air fares again seem to be major factor in the rise, whether the CPI or the CPI-H is the headline figure or not.


I cannot remember hearing anything to do with housing ever impacting the index, even though even the dogs in the street know that housing costs are one of this countries major blights.






3.  RE: Problems with the CPIH Inflation Measure

Posted 17-05-2017 15:09

Shaun,

 

A relevant question to ask is to which month the rents in the RE index relate.  They are not new rents centred on April 2017 but I understand that they are a mix of the rents from rental contracts over the last 18 months with a VOA reporting lag of another month.  If the RE index is centred about 9 months or so in arrears then that would put it not long after the Brexit vote

 

All speculative, of course, but it could help explain why CPIH annual increase is currently lower than CPI.

 

One issue is that there isn't a single ONS IPHRP paper but 5 different papers so it is difficult to come to any firm conclusions.

 

All the best.

 

Arthur.

 

IPHRP methodology papers links taken from an email from ONS
 
 
Details of the methodology used to calculate IPHRP can be found within the July 2013 release but this does require some updating;  
 
In March 2015 methodological improvements were implemented to improve the matching of properties over time. These are presented in an article published in January 2015;
 
We've then got the articles comparing IPHRP to other measures



4.  RE: Problems with the CPIH Inflation Measure

Posted 17-05-2017 19:14
Dear Shaun:
You make a very good point, which you also made in your notayesmanseconomics blog. I noticed the same thing in the article on the April update that appeared in the Toronto Globe and Mail; since it is from Reuters, I imagine you can find it all over the world:
One sentence says: "Excluding oil prices and other volatile components such as food, core consumer price inflation rose to 2.4 per cent, the strongest rate since March 2013". I had a worksheet that calculated the annual inflation rate for the CPI excluding energy, food, alcohol and tobacco at 2.5%, so I thought that here for some reason Reuters had switched to the core CPIH measure, which did show a 2.4% inflation rate for April. However, the annual inflation rate I calculated was based on index numbers to one decimal place and Table E of the April 2017 CPI bulletin shows a 2.4% inflation rate for April, so I suppose one of those ever so boring rounding errors accounts for the discrepancy. While both measures showed the same core inflation rates for April 2017, the core CPIH rate is the highest since January 2012, not since March 2013, as with the core CPI rate.
As you have said more than once, most business journalists are simple cut-and-paste typists, working from the official releases without any critical thought. So it is surely a damning indictment of the CPIH that here so many journalists all seem to have decided to reject the way the ONS would frame its release, reframing it so the CPI is the headline measure. If they reject it, it's probably not because they misunderstand the CPIH, but because they understand it only too well.
Best regards,
Andrew





5.  RE: Problems with the CPIH Inflation Measure

Posted 19-05-2017 09:50

Shelter makes an appearance in the latest CPI increase.

 Consumer Price Index Summary
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Consumer Price Index Summary
Transmission of material in this release is embargoed until 8:30 a.m. (EDT) May 12, 2017 USDL-17-0593 Technical information: (202) 691-7000 cpi_info@bls.gov www.bls.gov/cpi Media Contact: (202) 691-5902 PressOffice@bls.gov CONSUMER PRICE INDEX APRIL 2017 The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in April on a seasonally adjusted basis, the U.S.
View this on Bls >


I have never seen air fares identified as a significant factor in explaining an increase in the US CPI.

But that will be an issue with the weights. By which I mean the weights in the UK indices not the US indices.

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AL

how the US CPI actually worked to contain housing inflation

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