Politicians and economists are hailing the apparent fact that the Consumer Prices Index (CPI) has fallen to 5.0% for the year ending October 2011. However what many (including politicians) do NOT understand is that this type of result can be caused by one of TWO factors.
It may well mean that prices have decreased from the previous month but by the same token, it can also mean that prices may have spiked in October 2010, giving an apparent October decrease one year later. So, rather than percentages, let us have a look at the ACTUAL CPI figures for September and October.
The CPI was fixed at 100 in 2005. That simply means that a basket of prices was manipulated to produce an easy starting point. So, for instance, if the basket of prices added up to say £510.20, that figure would have been divided by £510.20 and multiplied by 100. This “factor” is then applied to all future baskets of prices.
In September 2010, the CPI was 114.9 and in the next month (October 2010, it was 115.2)
In September 2011, the CPI was 120.9 and in the next month (October 2011, it was 121.0)
So, you can see that between September 2011 and October 2011, the CPI is continuing its upward trend, although the month on month annualised percentage figure tells a completely different story.
PRICES ARE ON THE INCREASE ALTHOUGH THE GOVERNMENT IS PATTING ITSELF ON THE BACK AS IF SOMETHING HAD BEEN ACHIEVED!!!!!!!!!!
These are the figures which the government uses: CLICK HERE (and the government’s own (ONS) figures will appear in a pdf format. Look in the Right-Hand Column).